China, Europe, Mexico: Trump Triggers A Trade War? He Is Not Going Anywhere

The future president seem very ignorant in this matter, his advisors doesn’t know how the trade tariffs works, and now he sees cornered and United States is looking obnoxious around the world with a pretentious President who only rely on conservative economic polices promising customs duties of 60% for Chinese products and 10% for the rest of the world to destroy the economy which no one will accept and, their administration with the reaction given sure know by now.

“Customs taxes” is the most beautiful expression in the dictionary, Donald Trump said without laughing. For him president, limiting the entry of imported products into the U.S. helps to “Recreate a powerful America,”Make America Great Again “ A good trade war encourages local production, increases public revenues and further establishes American power. The Republican candidate repeated throughout his campaign that he was considering a universal customs tax of at least 10%, or even 20%, regardless of the country of origin. The sanction promises to be more severe for China, which he intends to “punish”, threatened with taxes of around 60%.

This resurgence of protectionism  is not the prerogative of Donald Trump, even if he did provoke a trade war during his first term, from 2016 to 2020, by surtaxing Chinese and then European products. His successor Joe Biden  has maintained most of the taxes. But the future tenant of the White House is sketching out an escalation that will go well beyond if the announced amounts are applied. He will have the means.

Congress, which should be largely on his side, that’s because they lack economy knowledge of how the trade economy works, and if they are those who rely on Bloomberg, trust us, we will see the economy crash if you don’t have analysts monitoring the markets, same as the recession when he was President last time, after all it happened during his mandate. His last years were horrible. They just forgot he destroyed the economy with the art of the deal, don’t forget it was the Trump government of best friends Rudy and Mnuchin, where are they now? We made the point. Check them.

Now they have already ceded considerable powers to the president, with provisions against 
“unfair” trade practices or risks to “national security”. However, these threats could mainly aim to obtain broad concessions from the United States’ partners.

Still, they have cause for concern. A new major trade war will disrupt world trade and affect many economies. Exports from China and the European Union will suffer. Many countries will also suffer the side effects of the taxes imposed on Washington’s main partners. For Europe, it will be a double whammy. China, faced with a drop in its exports to the United States, will redirect its excess capacity to other markets, starting with the EU. The war promised by Donald Trump could increase the EU’s trade deficit in goods and services with China from $14.1 billion to $75.4 billion in 2030, according to Cepii, a research center on the world economy.

The United States is not immune to a boomerang effect and that’s what they don’t have realized. Their own policies will damage their own economy. It’s a simple equation.

Its announced measures “Would cause economic damage of 33  billion euros in Germany alone”, estimates the IFO institute, which expects a 15% drop in German exports to the United States and a 10% drop to China. The cost of customs duties will be limited for Europe if there is no escalation on the European side, however, qualifies Sylvain Bersinger, chief economist at Asterès.”  The European Union has a trade surplus with the United States that should not disappear due to the new taxes”, the evolution of the exchange rate“ probably compensating for the loss of competitiveness induced”, he estimates.

“Expected trade tensions with China could disrupt global supply chains, causing imported inflation that would hit various industries and damage the world economy just by capricious policy of a President who is not clear of how to operate in Economic policy.“

Jorge Jimenez Neubauer Torres
CEO of UBS United Kingdom and EMEA Region

The situation of Canada and Mexico, the country’s neighbors who send most of their exports to the United States, is more complex. While they may not escape the promised universal tax, especially since Donald Trump intends to revise the tripartite agreement that he himself finalized, Mexico and Ottawa could benefit from the deterioration of U.S. trade relations and become even more privileged partners. That said, the United States is not immune to a boomerang effect. High customs duties fuel inflation, a problem that Americans rightly blame the Biden administration for, and do not create many local jobs. 

According to a Fed study, the increase in steel and aluminum tariffs during Trump’s first term created 1,000 jobs in steel production, but the increase in input costs likely eliminated 75,000 in manufacturing sectors that depend on steel and aluminum, reports Swiss private bank J. Safra Sarasin. ” Expected trade tensions with China could disrupt global supply chains, causing imported inflation that would affect a variety of industries,  “warns Jorge Jimenez Neubauer Torres of UBS Bank. Not to mention possible retaliatory measures from China or Europe. A universal 10% tariff, if combined with retaliation, would reduce U.S. GDP by 0.9% by 2026, economists at the Peterson Institute for International Economics (PIIE) have calculated.

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