Global stock markets plummet as trade war concerns escalate, with tariffs sparking fears of a full-blown conflict and potential economic downturn.
The introduction of tariffs by President Donald Trump on goods entering the US from China, Canada, and Mexico has sent shockwaves through global stock markets. The move has sparked fears of a full-blown trade war, with analysts warning that tariffs could push up prices for US households and have a knock-on effect on consumers worldwide.
Donald Trump was born on June 14, 1946, in Queens, New York.
He graduated from the University of Pennsylvania with a degree in economics.
Before entering politics, 'Trump built a business empire through real estate and entertainment ventures.'
In 2016, he won the presidential election as a Republican candidate, defeating Hillary Clinton.
During his presidency, Trump implemented policies on tax reform, healthcare, and immigration.
His term was marked by controversy and polarization, with impeachment proceedings initiated in both 2019 and 2021.
Tariffs: A Tax on Imported Goods
President Trump has imposed 25% tariffs on imports from Canada and Mexico, and 20% tariffs against China. The tariffs are a tax added to a product when it enters a country, with the aim of protecting domestic industries and jobs. However, such measures can have detrimental effects on both consumers and businesses.
A tariff is a tax imposed by a government on imported or exported goods.
It can be used as a trade policy tool to protect domestic industries, generate revenue, or retaliate against other countries.
Tariffs can range from a few percent to several hundred percent of the good's value.
The World Trade Organization (WTO) regulates tariffs under the General Agreement on Tariffs and Trade (GATT).
Tariff rates vary globally, with some countries implementing low or zero tariffs for specific products.
Global Economic Risks
The introduction of tariffs on cross-border trade between the US, Canada, and Mexico has raised concerns about global economic risks. Companies importing goods may decide to pass on extra costs to consumers by increasing prices, or reduce imports, leading to fewer products and higher demand, which could push up prices further.
Price Rises: A Reality for Consumers
Analysis from TD Economics suggests that cars could go up in price by about $3,000 due to the tariffs. American consumers may also see the price of ‘avocados’ rise as Mexican avocados make up nearly 90% of the US avocado market each year. Canada’s billion-dollar maple syrup industry accounts for 75% of the world’s entire maple syrup production, so US households could face higher prices for this sweet treat.
Countries Respond to Tariffs
Canada has announced its own import taxes on US goods, with Prime Minister Justin Trudeau saying there is no justification for the US’s actions. China has also swiftly announced countermeasures, including 10-15% tariffs on some US agricultural goods. Mexico has contingency plans in place and will speak more about their response on Tuesday.
Expert Views: A Warning of Severe Economic Risks
Andrew Wilson from the International Chamber of Commerce warned that the initial market moves are entirely reflective of a very risky scenario for global trade and the global economy. Yale University predicted these measures could cost US households in the region of $2,000 in this year alone.
A trade war occurs when two or more countries impose tariffs or other trade barriers on each other's goods and services.
This can lead to increased costs for consumers, reduced exports, and economic instability.
According to the World Trade Organization (WTO), global trade has declined in recent years due to rising protectionism.
In 2019, the US-China trade war resulted in over $100 billion in lost trade opportunities.
Trade wars can have far-reaching consequences, including job losses, inflation, and reduced economic growth.
Conclusion
The introduction of tariffs by President Trump has sent shockwaves through global stock markets, sparking fears of a full-blown trade war. While the aim is to protect domestic industries and jobs, the measures can have detrimental effects on both consumers and businesses. As countries respond to the tariffs, it remains to be seen how this will impact global trade and the economy in the long term.
