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As the trade war by US has only made a modest impact on global trade and the world economy, the chaos in financial markets evidently proposes that the confidence has taken a hit. From the time when the trade war came into effect, the dollar has risen 5 % on those fears and on solid expectations of investors for more interest rate hikes by Federal Reserve in this year and the next.
According to the opinions of many economists, trade protectionism approach taken by U.S would have a substantial downward impact on global growth.
It is based both on the already existing trade barriers raised by US and threat to levy tariffs on all $200 billion of Chinese exports at 25% rather than existing rate of 10% will probably make the situation worse. For the year 2018 and 2019, the average global economic growth forecast was 3.8% and 3.7% respectively according to information from Reuters data.
After the trade war started off the US economic growth surged to an annualised 4.1% in the last quarter but according to analysts, it is expected to lose its momentum in the current and following quarters.
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Economic growth in the China, Eurozone, France, Germany, Britain, Italy and Japan was also anticipated to slow in the current year and the next. Even India, which is conjectured to remain the fastest growing major economy in this year, is not expected to match or outshine the 7.7% growth reported for Q1 in 2019.
The trade war was started off with announced of imports tariffs by Trump with solar panels, washing machines, steel and aluminium in March, on EU, Canada and Mexico.
This made the trade partners angry and Canada imposed similar tariffs on July 1st.
After long hours of " talks or Major concessions" U.S has agreed to abstain from imposing tariffs on cars when both are entering into negotiations to remove other trade barriers which would ease the threat of a transatlantic trade war.
And what U.S gets instead is an increased demand for liquefied natural gas from EU and reduced trade barrier to soybeans, which would otherwise have affected the American farmers and energy industry. But the US tariffs of 25% on steel and 10% on aluminium will remain. European factory growth stood least affected due to the tariffs.
China is considered as the one most affected and now has lost its position as the second-biggest stock market, to Japan due to the fear of trade war and slowing economic growth. Among the worst performers this year Chinese equities are present with a slump of more than 16% (Shanghai Composite Index). Along with this US is thinking of imposing tariffs on Chinese imports worth $200 billion at 25% from 10%.
The retaliatory tariffs imposed by countries like Canada, EU, China, etc. has affected many companies and industries in U.S. Canada has implemented $16.6 bn in tariffs on products like whiskies, candles, sleeping bags, etc. which will match the US tariffs. The EU tariffs affected big companies like Harley-Davidson along with products like clothing, cosmetics, boats, and so on.
The withdrawal of U.S from the Iran nuclear deal and the decision of re-imposing all sanctions on Iran that were relaxed under the deal during the Obama administration. Through this US is trying to halt Iranian oil exports, by demanding for zero Iranian exports and no waivers for countries entering into business with Iran. According to SHANA reports, Iran’s crude oil export is 2.4 million bpd in May. And this makes many analysts believe that there can be a removal of at least 1 million bpd and 500,000 barrels from Venezuela, which will drive oil prices high.
Even though the higher supply of oil from OPEC helped in balancing some signs of shortages in the market, recently it was observed that the crude stockpiles at Cushing, Oklahoma which is the biggest U.S. storage hub may fall further from the lowest level in almost four years.
The Russian Prime Minister Dmitry Medvedev sees the sanction as trade war and as aimed to punish Russia for its suspected interference in US 2016 elections and actions in Ukraine. This will affect many Russian industries and the economy as a whole. It targets the energy sector with limits the money that Americans can invest in energy projects of Russia and foreign investments in helping energy exploration. And this will affect companies like Nord Stream 2 pipeline which is carrying natural gas to Europe, which also includes German companies.
When U.S is imposing sanctions on a country it makes sure that not only American companies but also other states are not getting into any businesses with that country. India being a significant importer of weapons from Russia and oil from Iran, both Iran and Russia two countries which are victims of two U.S economic sanctions, are longtime economic partners of India and thus it would affect Indian foreign trade. And as India cannot suddenly end up the trade relationships with these countries without considering a risk of national security it has to look for ways to balance the interests without spoiling its relationship with U.S.
It is also a fact that America has replaced Russia as the biggest arms seller to India and has also become a supplier of oil and gas, but it cannot replace India’s trade with Russia and Iran as a whole.
As we say ante of US in trade war it stands at the game changer position, but whether that can be an unfading throne, is a question that all are looking forward. It is a known fact that U.S is an import-dependent country, and rising retaliation tariffs from different countries are definitely affecting the consumers. The rising tariffs will hurt the consumers as the price of goods will go up and the domestic producers that produce certain goods which were otherwise imported will be provided with a shield that allows them to charge a higher price. It will also extend to manufacturers that use imported raw materials for production, this will lead to rising prices and make their profits uncertain.
Moreover, a substantial part of China’s exports to U.S is produced by U.S firms in coordination with factories in China. Thus those US companies will shift their Chinese exports from U.S to other favourable markets.
U.S wanted the countries to shrink imports of Iranian oil and China rejected this request even though it has agreed not to rise up its purchases. Sinopec, largest refiner of China will pause its purchases of U.S. crude as a result of intensifying trade war between both the countries. This puts forward a threat for American imports being more expensive.
When U.S tried to raise the crude oil prices and abstract the benefits of lower shale gas prices. But this will fail as Saudi Arabian Oil Co. has reduced its monthly pricing to most of the countries as it has boosted the oil supply to meet the customer demand. Along with this China being an importer of US crude due to the attractive discounts provided as compared to the Brent and the benchmark of Middle East, has imposed tariffs on US imports and this will make US crude more expensive than Brent.
It can be seen that no war ends up with no losses, and there cannot be winners and losers.
Winners And Losers Of Trade War. (2024, Feb 02). Retrieved from https://studymoose.com/winners-and-losers-of-trade-war-essay
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