NewsTrump's tariff gamble triggers global economic upheaval

Trump's tariff gamble triggers global economic upheaval

The decision by US President Donald Trump to impose tariffs is the most significant change in global trade in a century, according to BBC News economics editor Faisal Islam. In a commentary published on Thursday on the service's website, he argues that a global, albeit chaotic, trade war seems inevitable.

President of the USA Donald Trump
President of the USA Donald Trump
Images source: © Licensor | SAUL LOEB

According to Islam, two charts demonstrate the substantial impact of American tariffs on the world economy: drops in stock markets, particularly in Asia, and the increase in American tariff revenues, which have reached levels not seen in a century, surpassing those of the 1930s.

Here are the consequences of Trump's decision

He stresses that Trump's decision will significantly affect global trade channels. He predicts that the implementation of American tariffs will "break the business models of thousands of companies, factories, and possibly entire nations."

Some of the supply chains created by the world's biggest companies will be broken instantly. The inevitable impact will surely be to push them towards China, adds the BBC editor.

According to him, bringing the US trade deficit "to zero", which is the aim of American policy, means "a remarkable rerouting of world trade flows."

- Deficits and surpluses are a normal part of a functioning trade system where countries specialise in what they are the best at making. The US has now spectacularly ended that logic. But shifting factories will take years. Tariffs at this scale on East Asia especially at 30 or 40% will hike prices of clothes, toys and electronics much more quickly - notes Islam.

He questions how the world will react to this. He suspects that some European consumers may boycott products manufactured in the USA. Additionally, the monopoly of large American technology companies in the social media industry could also be challenged. This is evidenced by the decline in sales of Tesla cars, owned by Trump adviser Elon Musk. At the same time, US authorities may be forced to raise interest rates to counteract the inevitable rise in inflation.

New American tariffs

Signed by Trump on Wednesday, the directive imposes "reciprocal tariffs" of at least 10 per cent on goods imported from abroad.

For goods from the EU, they will be 20 per cent. The rates announced by the USA are meant to account for half of the combined tariffs and non-tariff trade barriers used by other countries.

For China, the tariffs will be 34 per cent (this rate will be added to the previously announced 20 per cent tariffs, totalling 54 per cent), Japan - 24 per cent, India - 26 per cent, South Korea - 25 per cent.

The universal 10 per cent tariff rate is set to take effect on 5 April, while tariffs on specific countries - on 9 April.

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