Trump Tariffs As Confrontation, Deterrence And Art Of The Deal
Date
12/23/2024 6:12:19 AM
(MENAFN- Asia Times)
The last time Donald Trump was US president, he entered trade wars with China and Europe . But despite his bravado and tariffs, the US trade deficit did not improve.
In fact, it deteriorated from US$195 billion in the first quarter of 2017 to $260 billion in the same period of 2021.
The first round of Trump tariffs were at a maximum of 25% and were slapped on a number of selected goods. But now his policy appears to be that the US will apply tariffs of 10% or 20% to most imported goods. Canada and Mexico could be facing tariffs of 25% – and Chinese products might be looking at 60%.
This new proposal seems to be significantly different to the previous one. So what are the possible scenarios for the US, the UK and the global economy?
Scenario 1: Confrontation
Taking the president-elect's word to the letter, if Trump stands his ground on across-the-board tariffs one consequence may be that the US economy faces higher prices because of more expensive imports. The demand for US-produced goods will increase, which is likely to push up domestic wages – and could end with spiraling inflation.
It is not difficult to imagine the US economy overheating rapidly. However, there are also opposing forces. Higher tariffs and large investment in the US will most likely trigger an appreciation of the dollar, meaning imports becoming cheaper at the border before tariffs are applied. This could eat away at inflation.
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