All Financial Wisdom
The Trump Trade Wars
On Monday, Donald Trump addressed workers at a factory in Blue Ash, Ohio. Blue Ash is a quiet city near Cincinatti, a quiet town in which to raise a family in the American Rustbelt. The sort of town inclined to support Trump, since it does not get to be in the global economy as they are doing places like New York or San Francisco.
Donald Trump has accused Germany and China of competing dishonestly with the North American industry. In addition, the recent increase in tariffs on solar panels (which are mainly produced in China) and washing machines, has raised the alarm in all those who export to the United States. Are we reaching the era of the Trump trade wars?
We have commented that the problem of industrialization is not necessarily the imports of countries with cheaper labor costs (and less environmental regulation), but it is also true that Donald Trump must somehow satisfy his electorate.
Trade war with China
Although Donald Trump defended the protectionism in his electoral program, during the first year he has done practically nothing in this aspect other than threatening by Twitter to car manufacturers. Although it is also true that it ended the Pacific Trade Treaty, which was a major blow to the future of free trade. However, this may be relaunching soon.
China, for its part, has noted its lack of satisfaction about the 30% tariff on solar panels and washing machines, however, it has not made any movement yet. If this is a commercial war, the truth is that the first shot “has been with a blowgun”, as some expert has commented. China has not responded at the moment.
There are also two factors to consider in this “commercial war”, the first is that it is quite possible that China has more to lose than the United States, since it exports large amount of goods. The second is a non-economic factor, and that is that Donald Trump needs the collaboration of China if he wants to end the current regime of North Korea.
Trade war with Europe
Another area that Donald Trump has open in his fight against protectionism is regarding European imports. Europe is a great trading partner of the United States, and according to Donald Trump, European companies sell their products in the US paying very few taxes, while American companies can not sell their products in Europe.
That is not true, the US exports goods and services to Europe and European companies pay taxes in the US (while the EU and European governments are dedicated to investigating how to make Americans pay taxes in Europe). For Trump, the EU is an instrument of Germany to introduce its exports into the US through an artificially weak euro.
Of course, the European bureaucracy does not want to be quiet in this regard, and has responded that they are willing to take action if they see that EU exports to the US decrease by measures taken by the US government. That is, they have warned that they are willing to defend themselves tooth and nail if Donald Trump establishes protectionist measures with the EU.
In fact, as we have mentioned, it has been the Trump presidency that has pushed Japan and the EU to set up the largest free trade area in the world.
Trade war with North America
The North American Free Trade Agreement or NAFTA is an agreement between the US, Mexico and Canada that, for several years, has allowed a free trade zone between the three major countries that populate North America. It is a great example of free trade.
Well, Donald Trump is threatening to break it if Mexico does not agree on the renegotiation it wants to make. This could pose problems for those companies that have been building their competitiveness based on using the advantages of each side of the border. He also wants to use it as a condition for Mexico to pay for the border protection wall he wants to use to stop immigration to the United States and which has been one of his most well-known and controversial electoral promises.
Will we see the start of Donald Trump’s trade wars in the coming months? The world is watching