Trade War is Officially ON

Picture Credit: upi.com

The world is bracing for an intense trade war as the United States, under President Donald Trump, imposes sweeping tariffs on major trading partners.  The U.S. average tariff rate increased from 2.4% to 10.5%, the highest they have been since the 1940s, as a result of significant tariff hikes at the start of the conflict: 25% on Canada and Mexico and 20% on China.  Trump claims that since other countries have long taken advantage of the United States by imposing higher tariffs, it is now time for America to strike back. 

 However, the response has been swift. Canada filed a dispute at the World Trade Organization (WTO) after imposing a 25% reciprocal tariff on $107 billion worth of U.S. goods, claiming that the action was an attack on its economy.  Prime Minister Justin Trudeau eschewed diplomatic jargon, calling the decision "dumb" and referring to Trump as "Donald." 

Retaliatory tariffs were declared by Mexico, which is highly dependent on U.S. trade, with 83% of its exports going to the U.S.; further information is anticipated soon.  The Mexican government emphasized cooperation but rejected subordination to U.S. policies. 

Picture Credit: edition.cnn.com

 China, a major participant in international trade, retaliated by imposing its own 10–15% tariffs on American agricultural products, placing 10 American companies on a list of "unreliable entities," and filing a case before the WTO.  Beijing threatened to battle to "The Bitter End" if the United States persisted in the trade war. 

 This trade war has serious economic repercussions.  Businesses and consumers pay more as a result of tariffs, and analysts worry that a recession akin to the 1930 Smoot-Hawley Tariffs, which exacerbated the Great Depression, may occur. 

As uncertainty looms, global economies are in a dangerous waiting game. Will Trump double down, or will negotiations ease tensions? One thing is certain—the trade war has officially begun.