Trade wars not the answer, US needs more allies

Published: Sat 16 Jun 2018, 10:43 PM

Last updated: Sun 17 Jun 2018, 12:43 AM

US President Donald Trump is at it again. This is the third time this year that the president is using tariffs as a weapon, as a ruse to protect American consumers and domestic interests, while playing to the gallery. In January, the Trump administration had imposed steep duties on imported washing machines and solar panels. Then came steel and aluminium levies on Canada, Mexico and the European Union. And now, the US has slapped 25 per cent tariffs on $50 billion worth of imports from China. "Trade wars are good, and easy to win," Trump had tweeted in March. How exactly would these tariffs benefit the American consumer remain to be seen. Higher taxes on washers have led to 17 per cent rise in prices of laundry equipment in the US, pushing the prices of US-made washers higher. Traditional western allies in Europe and China are hitting back. The EU and China have imposed higher tariffs on US-manufactured washers. It could prompt manufacturers such as Samsung and LG to shift their manufacturing base to other countries, which could lead to loss of employment for Americans. Small numbers, but then again here lies the paradox. China has also issued retaliatory tariffs on 25 per cent on high-value US imports, targeting agricultural produce, cars, liquefied propane and more. In the game of tit-for-tat, it is the American consumer that stands to lose in the end.
The thinking that surplus America wins, and with a trade deficit it loses is flawed. The US is the world's largest economy worth more than $20 trillion, and naturally it has very high consumer demand that is helped with imports. A tariff-for-tariff approach, therefore, won't work. The power of alliances has helped America develop into an economic and military superpower in the last century. The Trump administration is right about some of the unfair trade policies followed by China. But it will do well to remember that the fast growing Asian dragon cannot be brought down to its knees with this approach. America needs to join hands with its allies in North America, Europe, and Asia to confront China, and more importantly, have a coherent and rational policy that boosts trade and commerce.

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