Trade Wars: What’s Happening Now?

Recently, UKTPO along with Centre for Trade and Economic Relations conducted a seminar on the trade policies implemented by US, especially under the Trump administration. Since we have already discussed the issues with this Trade War before, I figured it would be a good idea to follow up with the issue. In this post, I will be giving you a brief timeline of the trade wars, after which I will summarize and explain the positions taken by the speakers in the seminar. For those who would like to read more on Legally Flawed’s previous articles dealing with Trade Wars, you can find them here, here and here. Read on to know what I have learnt in the last month regarding Trade Wars.

Introduction

On 3rd October 2018, I came across a seminar titled “We need to talk about Donald”. Completely agreeing with the title of the seminar, I attended it. The talk was divided into 2 parts:

  1.  A presentation on the consequences and responses to the Trade Wars by UKTPO based on the studies conducted by them.
  2.  A presentation on if this was even a “Trade War” to begin with.

The first part analysed the effects of the Trade Wars between US and the rest of the world. By applying the Partial Equilibrium Modelling, it concluded that China, through a targeted response, could raise its tariffs. 

The second part of the talk questioned the validity of the term trade wars itself. For the purposes of this article, I will only be looking into the second part of the seminar.

But before we get into my interpretation of the ideas put forth by these experts, let’s have a quick recap of what’s happening with the trade war.

US China Trade Wars
Source: Money Control

Timeline of Trade Wars

DateEvent
22.1.2018US imposed tariffs on Solar Panels and washing machines
09.3.2018US imposes tariffs on imports of Steel and aluminium at 25% and 10% respectively
23.3.2018China responds to these tariffs as it is the world's largest exporter of steel and aluminium. It imposes tariffs on US imports worth USD 3 billion
02.4.2018China imposes tariffs on US imports amounting to USD 3 billion, which includes fresh fruits, nuts, wine and pork.
03.4.2018US, in an uninspired manner, retaliated again. This time with USD 50 billion worth of imports (25% worth of tariffs)
04.4.2018China retaliates by proposing to levy additional 25% tariffs on US products.
April-May, 2018Unsuccessful talks between US and China
31.5.2018After the period of exemption expired, the steel and aluminium tariffs (25% and 10% respectively) were imposed on Canada, Mexico and EU
31.5.2018Canada announced tariffs on $12.8 billion in US products, and Mexico declared it would place duties on steel along with other products, totaling $3 billion. The European Union called it a "bad day for world trade."
JulyWhile the trade war between US and China escalated, US-EU worked towards lower trade barriers
23.8.2018US-China implement a second round of tariffs
24.9.2018US-China implement a third round of tariffs

The table was compiled on the basis of the information collected from here, here, here and here.

Richard Baldwin: Is it even a Trade War?

Prof. Richard Baldwin
Prof. Richard Baldwin

Richard Baldwin is a Professor of International Economics at the Graduate Institute. He brought in an interesting viewpoint to the table, questioning if the phenomenon of imposition of tariffs could be called a trade war. He stated that these “trade wars” were not comparable to the previous trade wars.-previous trade wars-

Prof. Baldwin, instead of terming this event as a trade war, renamed it “reverse regionalism”. He stated that these wars were in fact, functioning as reverse FTAs (Free Trade Agreements); where instead of lowering the prices and trade barriers, the countries involved were increasing them. Thus it was a way in which US was ruining its trade exports. It would explain why the tariffs put up by US is not affecting many individuals.

Another valid explanation for the continuing trade war was that it was no longer based on economic policies. Prof. Baldwin explained that if it was just an economic issue, there would be a solution. But now, especially in the stand off between US and China, nationalistic ideas were attached. This view further snowballs the problem. 

How to end the Trade Wars? Prof. Baldwin believes that retaliation is the only way, and that it has already started working.

What do you think of this interpretation? Do you agree, not agree, couldn’t care less? Let me know in the comments.


Note: The views in this article are the author’s interpretation of the seminar and do not reflect the views and opinions of UKTPO, Graduate Institute or Prof. Richard Baldwin

1 thought on “Trade Wars: What’s Happening Now?”

  1. A retaliation for a retaliation makes the consumers suffer. There is a limit to the tariff increase behind which it will be unsustainable for the consumers in these countries. When the countries feel pressure from this group, they will be forces to remove tariff due to inflation. (Best case escenario)

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