Trump’s next trade tit-for-tat

While the trade war between the US and China may now be settled in negotiations, a new trade dispute is looming over the global economy.

943-ship-634

Global trade volumes slipped by 1.8% between January and March

World trade volumes fell by 1.8% in the first quarter compared with the previous three months, according to figures from the Dutch government. The sudden loss in trade momentum has been almost as severe as the aftermath of the 2001 dotcom bubble when trade volumes slid by 2.2%, says Tom Rees in The Daily Telegraph. And while the trade war between the US and China may now be settled in negotiations, a new trade dispute is looming over the global economy.

US president Donald Trump is taking on Europe. In response to a dispute over aircraft subsidies, Trump's administration has drafted a list of tariffs on $11bn-worth of European goods, and is also considering new levies on European cars. American fans of "fine European swordfish steaks, cotton sweaters, jams, and binoculars" should "stock up before tariffs take effect", say Annaliese Griffin and Jason Karaian on Quartz.

In retaliation, Brussels is considering punitive tariffs on $12bn-worth of US exports. American goods on the provisional list include frozen cod, beeswax, tractors and car parts, notes Jim Brunsden in the Financial Times. But in a "tit-for-tat battle, the European bloc is... the weaker party", says Irwin Stelzer in The Sunday Times. Europe's unemployment rate is twice America's, its highly taxed citizens are "easy prey" for populist parties, and its economy has slowed. Crucially, EU exports to America exceed imports from the US by about $100bn a year.

If the tariffs are imposed, the main loser would be Germany, as America is the biggest buyer of German cars. The EU reckons that Trump's 25% tariff would add €10,000 to the price of a car made in the EU; the bloc's exports to America could halve. German growth is already heading for 0%, and the car levy could tip it into recession.

Recommended

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Interest-rate rises mean more pain for stocks
Stockmarkets

Interest-rate rises mean more pain for stocks

Interest rates are rising around the world as central banks try to get inflation under control. That’s hitting stockmarkets – and there is more pain t…
13 May 2022
High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022
Currencies: the yen just keeps on tumbling
Currencies

Currencies: the yen just keeps on tumbling

The Japanese yen is trading close to a 20-year low with the US dollar, with the Bank of Japan in no rush to raise interest rates.
11 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022