In the idea of reducing the trade deficit of the United States, the White House has therefore increased customs duties on steel and aluminum. Europe and China responded with retaliatory measures, which in turn led to an American bidding up.
A gear that risks making only losers
To the rise in customs duties on steel and aluminum, the European Union responded with surcharges on jeans, bourbon, orange juice or even “made in USA” motorcycles. China has decided to apply 25% taxes on a whole range of American products, mainly targeting the agricultural sector.
The gear is well and truly engaged: Washington promises a new round of measures, applicable from September, on nearly 200 billion Chinese products. Donald Trump even threatens to eventually tax almost all imports from China, nearly 500 billion of goods. Europe also risks not being spared with a possible 25% increase in customs duties on its automotive sector.
Feverish markets
Logic now is eye for eye, tooth for tooth. Each retaliatory measure results in an even stronger response. And with it, a risk of destabilization of the world economy. The European Commission has also just revised its growth forecasts downwards. Financial markets are showing signs of nervousness. The stock market indices are playing the yoyo. The summer could be very hectic in the financial centers.
A trade war that will only result in losers. First, it does nothing to address the issues of distortion of competition, intellectual property or technological plunder. Donald Trump’s protectionism is not the answer to the excesses of globalization.
The trade war is indeed likely to cost all the belligerents dearly
In France, the Economic Analysis Council worked on several scenarios: in the most extreme, that of a total trade war. The impact would be comparable to that of the 2008 crisis. Not the most likely scenario, but not impossible either, say the authors of this report. They calculate that France could see its GDP fall by 3%. This would result in a loss of nearly 1,200 euros per year for French households.