The Trade War

The trade war between China and the US on tariffs was seen as a temporary setback and after the trade deal the markets, the economy would become stable. But many observers believe that the trade battle can last longer than most people think and in fact, can be on till the Trump administration is in power dubbing it the Forever Trade War. The reason for this thought is the administration wants to continue the trade battle and also impose permanent tariffs on other countries.

The chief economist of IMF Gita Gopinath said ‘We see an escalation of trade tensions as an important risk. Though there have been improvements between the US and China and a possible agreement in the near future, we are worried about trade tension escalating in other sectors like the auto sector’.

This statement comes in the wake of the White House planning to impose $11 billion as taxes on aviation imports from Europe after which there is a possibility of tariffs on auto imports too.

Another indicator that the US does not want the trade war to end is the terms of the new trade deal wherein the US wants to retain the power to put corrective tariffs on China permanently. Even the likes of global economist from Merrill Lynch Ethan Harris expects the trade war to not end, even if the two countries reach an agreement. He said ‘The trade war is not going to go away during President Trump’s tenure in office. I think it will go through periods of hot war and cold war’.

It is still not clear what the Trump administration hopes to achieve either in the political or economic front. The trade war can be temporary if White House is using it to remove unfair trade practices, enable the country get a better deal and get back the market share from China, but since the trade deal is not reached yet it is not clear on what the government intends to do. On the other hand, Trump has called himself the Tariff Man and there is great speculation what works best for him, is it trade peace or trade war.

But many analysts believe that Trump finds it more beneficial to continue the battle with US trading partners. But if the real reason is to regain the market over its competitors the revival needs considerable time and investment, but the goal remains unclear.

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