USA Trade Barriers

Context:
US under Trump is imposing tariff barriers on all major economies.
What is Trade war?
  • A situation in which countries try to damage each other’s trade, typically by the imposition of tariffs or quota restrictions.
Tariff against China:
  • United States has slapped stiff 25% tariff on US $50 billion worth of Chinese goods.
  • It has accused China of intellectual property (IP) theft and unfair trade practices.
  • This decision has triggered full-fledged trade war between world’s two largest economies.
  • The tariffs will be applied in two waves. The first will apply to 818 Chinese goods worth $34 billion and in second wave it will apply to 284 goods worth another $16 billion.
  • It generally focuses on products from industrial sectors that contribute to or benefit from “Made in China 2025” industrial policy.
  • It includes industries such as information and communications technology (ICT), aerospace, robotics, industrial machinery, new materials, and automobiles.
Tariff against others:
  • US’s decision to impose fresh tariffs on China follows his recent imposition of steep tariffs on steel and aluminium imports from Canada, European Union and Mexico on national security grounds.
Action taken by other countries:
  • The EU and Canada are planning to enact retaliatory tariffs starting in July 2018.
  • Mexico has already retaliated with its own tariffs on US goods.
  • India is also imposing new Tariffs against US imports.
Implications
  • Consumers in America and the rest of the world are likely to suffer as their respective governments make it costlier for them to access foreign goods and services.
  • As former Reserve Bank of India Governor Raghuram Rajan aptly put it, the ongoing trade war is a “lose-lose situation” for the warring parties.
  • The only winners will be special interest groups and consumers in countries that do not engage in the tit-for-tat tariff war, but their winnings will come at the cost of global growth.
Conclusion
  • This leads to eventually slower global economic growth.
  • The World Bank has warned that the effect of the increased use of tariffs to regulate international trade could be similar to the significant drop in global trade after the financial crisis a decade ago.
  • It is high time countries worldwide come together to promote the cause of free trade.
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