Retaliatory Tariff Promises Between Countries, Sparks Concerns of a Possible Trade War
The introduction of new tariffs on imports from several countries by the Trump administration has sparked a volley of retaliation on different levels between the U.S. and the impacted countries. According to reported statements from former State Department economist Chad Bown, “U.S. tariffs on imports are typically low — averaging 2-3% — compared to 5% in the European Union and 13-14% in some developing countries.” If has been further pointed out that “because other countries make it harder to sell products there, instances may exist where the U.S. is at a competitive disadvantage despite the U.S. fighting to lower those foreign trade barriers for decades. Action by President Trump represents what has been described as a “really big shift,” since by contrast, he is responding with higher trade barriers here at home. Tariffs already imposed include a 25% tariff on other imports from Mexico and Canada, with some exemptions, and a 20% levy on Chinese goods. In addition, a 200% tariff on alcohol from the European Union (EU) countries has been threatened unless the EU eliminates a 50% tariff on whisky. Although the actions by the White House “reflect a bit of a frustration that the United States has felt over the last 15-20 years of a reluctance of the rest of the world to open up any further,” concerns are developing of a possible trade war as retaliation of both sides of the table heat up, and the potential of Trump’s ”stop-and-start tariff” policies pushing the economy into a recession. In a tone of optimism Larry Fink, the Chairman and Chief Executive Officer of BlackRock, reportedly told CNN that “the Trump administration’s policies ‘can be very productive for the United States’ in the long run,” however, Bown pointed out that the promise by other countries to retaliate is “reminiscent of the one that followed the Smoot-Hawley Tariff in the 1930s, widely seen as prolonging the Great Depression,” and described in a historical highlight on the U.S. Senate website as being “among the most catastrophic acts in congressional history.”