What Does a Trade War Look Like?
International trade has been all over the news lately, with the worrying term “trade war” getting thrown around regularly. The Trump administration just approved steep tariffs on imports from China, and Canada, Mexico, and Europe are targets of higher tariffs as well. In response, the countries affected by new policies are planning to place heavy duties on American-made goods. This tit-for-tat trade policy is a key feature of a trade war.
We might think about trade wars -- and this trade war in particular -- as affecting products that may not pop up in our everyday lives. President Trump, for example, initially announced tariff hikes on aluminum and steel, two items that we don’t think of much on a daily basis. Of course, it’s true that both products affect everyday consumers (your beers will likely be more expensive), just not in an obvious way.
But, as we wrote before, trade wars may start with a focus on one item, but they spread to different products from different industries as countries go back and forth with retaliatory tariffs.
As freight forwarders, our business is impacted by consumer demand -- both for end products and for commodities markets that power them.
So here’s a look at how the tariffs might affect different trade partners.
US vs. EU
The US began its tariff hikes on imports from the European Union with aluminum and steel, but it didn’t stop there. A new tariff on imported olives, for example, has already harmed olive production in Spain.
The EU responded quickly to President Trump’s initial announcement by promising approximately $7.5 billion worth of tariffs on about 200 US exports, ranging from motorcycles to denim, to peanut butter.
Agricultural exports to the EU like nuts, grains, and prepared foods, which totaled $11.5 billion in trade in 2016, are directly targeted by the EU’s retaliatory tariffs. Other everyday products affected include makeup, orange juice, cigarettes, and bourbon.
US vs. China
Approximately $50 billion in imports from China could be affected by US tariffs which may be imposed as early as June 15th. Electronics and household appliances like television sets and dishwashers will be tagged with an import tariff. So will auto parts. Initially, about 1,300 Chinese-produced goods were subject to tariffs. It’s expected that the list has been cut down to about 800-900 products.
China responded with raised tariffs of their own. The American agricultural industry is in their crosshairs: fruits, nuts, and other fresh and preserved foods are subject to retaliatory taxes.
US vs. Canada and Mexico
On June 8th, President Trump tweeted about exorbitant tariffs Canada has levied on the US, explicitly referencing dairy products. He wrote that a 270% tariff on dairy products was “Not fair to our farmers!” Of course, dairy isn’t the only everyday-use US export to Canada that faces a tariff hike.
The list of proposed tariffs is filled with consumer goods that you’d find in any home. Canada has promised to tax: prepared meats, pizza, soy sauce, condiments like ketchup and mustard, water, whiskey, pens, aftershave, detergents, and items containing aluminum like kitchenware and beer cans.
South of the border, Mexico implemented $3 billion worth of tariffs that focus on agriculture products like meat and fruits in response to aluminum and steel tariffs.
In a trade war, everyday life could get pricier, and demand for the products freight forwarders and NVOCC’s send around the world could drop. What would a trade war actually look like?
It looks like we’re about to see for ourselves.
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By: Fauad on June 15, 2018, 2:46 p.m.