Trump is planning “trade wars”

After his inauguration, the new US President Donald Trump plans to raise tariffs on imports of foreign goods to the US.

Why this could lead to trade wars with China and Europe and how it will affect Ukraine - read in RBC-Ukraine's article.

Trump is threatening to raise import tariffs in the US

Trump's campaign slogan was “Make America Great Again”. The country's economy is supposedly in decline, and cheap goods from China and other countries make it unprofitable to produce in the United States. In addition, this leads to an increase in the US trade deficit with China and other countries.

The way out, according to Trump, is to make imported goods more expensive than those produced in the United States through high import tariffs. Thus, in the medium term, it should become profitable for companies to return production to the United States.

Other countries perceive the introduction of tariffs as hostile actions and are ready to respond to them. In fact, the exchange of such blows to each other's economies is called “trade wars.”

What Trump and his team are planning

Trump pursued this policy during his first presidential term, when he imposed duties on Chinese goods of 7.5%-25%, depending on the product category.

Joe Biden, when he became president in 2021, maintained most of the tariffs imposed by his predecessor on China. But this time, Trump may increase tariffs even more after returning to power.

“The probability is very high, because if you look at world trade in general, as part of globalization, it seems that globalization is not working for the US or the EU, it is working for China, for the rapidly growing countries that are taking over the functions of global economic leaders. And it is precisely because this trend does not suit the United States and has begun to work against the United States that Trump wants to take steps to increase tariffs,” Ivan Us, chief consultant at the Center for Foreign Policy Studies at the National Institute for Strategic Studies, told RBC-Ukraine.

The new US Secretary of Commerce will be in charge of implementing the tariffs. Trump has already chosen Howard Lighthizer for this position. He is a 63-year-old billionaire investor and CEO of the investment company Cantor Fitzgerald, but he has no experience in diplomacy or public service.

Trump may raise import duties in early 2025. On average, by 38%. However, for different goods, they can range from 15% to 60%. This is the consolidated opinion of more than 50 economists interviewed by Reuters between November 13 and 20.

“Almost 40% is a high number, but given Trump's unconventional approaches, I don't rule out that it will be, at least for China with a high probability,” said Wu.

At the same time, Trump has a powerful deterrent to raising tariffs. During the election campaign, he actively criticized Biden and Harris for the sharp rise in consumer prices during their tenure. According to polls, this is one of the main concerns of Americans.

An increase in tariffs in the short term will lead to an even greater increase in prices for imported goods. According to modeling by the Third Way think tank, the introduction of a 15% tariff would increase American families' grocery spending by 14%. Therefore, according to Usa, the possible consequences will be calculated for each individual tariff.

In addition, during his first presidential cadence, Trump liked to use tariffs as a means of pressure in political negotiations, without necessarily introducing them. On the other hand, the countries against which tariffs will be imposed may do the same with respect to American goods.

Author - Dmitriy Levchenko, 25/11/2024