Donald Trump’s tariff plans could spark global economic shock
The Resumption of Global Trade War by Donald Trump
After a period of relative calm, the global trade war initiated by Donald Trump has once again reared its head. The US president’s recent threat of imposing a 50% tariff on all goods from the European Union in a week’s time indicates that the tensions were merely on hold and have now resumed in earnest.
Market uncertainty and social media diplomacy have added to the volatility of the situation, setting the stage for a tumultuous period ahead of the crucial G7 summit in Canada next month.
The recent turn of events stems from the US decision to ease its trade conflict with China, causing other key US allies to slow down their own negotiations with the US. Allies are wary of being treated worse by the US than China, leading to a standstill in talks.
President Trump’s latest intervention, surpassing even the worst-case scenario of a 20% tariff rate on the EU in early July, is a deliberate move to push stalled talks forward. Treasury Secretary Scott Bessent has openly stated that these threats are meant to “light a fire” under negotiations.
While many in the EU and other countries like Japan believe the US is bluffing, citing the recent retreat against China due to economic concerns, the possibility of a full-blown trade war looms large. The EU may reinstate its own paused retaliation, while the rest of the world, excluding China and the UK, watches closely.
The UK, with trade deals in place with both sides, may find some insulation for its economy. However, a complete resurgence of a transatlantic tariff war could lead to a trade shock that would be challenging to navigate.
The current situation underscores the fragility of global trade relations and the unpredictable nature of economic diplomacy in a world where protectionism and nationalism are on the rise.
