Positive trade relations among countries are manifested by greater consumer choices, the creation of new jobs, and better pricing for products and raw material that are needed to keep industries alive. In a perfect world – where leaders always make the best decisions – multinational economies are symbiotic at best. On the other hand, taking a glimpse at recent Trump tariffs on aluminum, steel, Chinese goods, and washing machines, we learn that the imposition of taxes on imports and exports can turn into a looming nightmare for workers and traders.
A Background on Trump Politics
When Trump won the Presidential seat in 2016, his campaign was to “put America first” and “bring jobs back” to the homeland. How was he going to do this?
Economic analysts have described Trump politics as protectionist, semi-isolationist, and skeptical of free trade and immigration. Ultimately, the US under Trump is exhibiting bias against free trade agreements and offshore operations.
Trump policies are introducing a rift to existing trade relations. The intention is to empower American workers and consumers. Looking at recent Trump tariffs though, can we say that Trump is going the right direction?
Trade Wars with China
Trump recently announced tariffs of 25% on $50 billion worth of Chinese goods. This move has caused a burst of opinions, backfires, and projections for the American economy.
China is now being taxed more for exporting items that are commonly consumed or purchased by Americans. These items include gadgets such as smartphones and washing machines. Trump’s goal is to push Americans to support American and brands and tip the competition against foreign countries.
The political philosophy is indeed isolationist and ignorant of potential backfires. China did respond and has now imposed tariffs on $50 billion worth of American goods, including meat products and cars. What a backfire!
Now that’s what we call a trade war.
Repercussions to consumers
It isn’t hard to see how taxation can change the selling price and the production costs of goods. A brief example to look at is the recent imposition of tariffs on steel. Factories that need imported steel would now have to acquire it in fewer quantities or more expensive prices, tipping the scale for worker’s wages and the price of the products once they hit market shelves. Foreign companies might also be more reluctant to create jobs in the US or import their products due to tariff.
Trump tariffs, on the surface, intend to empower Americans and “protect American jobs” while benefiting from the goods and tariffs paid by other countries. What the administration has been dismissive of, for the most part, is how other companies will respond and how this will affect the impression that the US is making in the global economy.
A Hope for Resolution
When fostering trade relations, the goal is to establish mutual benefit. Trade wars and collapsing economies are the least we expect. Before the downfall or crash of any market or industry, we have our fingers crossed that our leaders learn to make better decisions.