US President Donald J. Trump’s recent enactment of tariffs has plunged America into an intricate web of trade hostilities with its key trading partners – Canada, Mexico, and China. The tariffs came into effect on Tuesday, 4th March, despite prior diplomatic consultations indicating a possible delay. Let’s delve into the layers surrounding this development and its historical context.
why the US resorted to tariffs
Trump asserts these measures are crucial, pointing to the influx of drugs, notably fentanyl, into the US, as well as the significant trade deficits with these countries, which are America’s top trading partners.
“Number one is the people that have poured into our country… number two are the drugs… and number three are the massive subsidies we’re giving over deficits,” Trump proclaimed at the Oval Office.
However, the tariffs aren’t universally popular. Diverse analysts, including Ryan Sweet of Oxford Economics, have noted their adverse economic repercussions. Sweet suggests an estimated reduction of 0.7 percentage points in US GDP growth by 2025, thanks to these tariffs.
historical perspectives on trade disputes
Trump’s actions revive a tactic wielded by previous US presidents, like the notorious Smoot-Hawley Tariffs of 1930. Spearheaded by Senator Reed Smoot and Representative Willis Hawley, these tariffs sparked global trade wars, particularly hitting US exports, which plummeted by 61% by 1933. This move is often blamed for exacerbating the Great Depression.
Similarly, in 1963, the ‘Chicken War’ erupted when the EEC, apprehensive of cheaper American poultry, imposed tariffs on US chicken imports. In retaliation, President Lyndon B. Johnson unleashed tariffs on European goods such as potato starch, brandy, and light trucks, mirroring today’s tit-for-tat approach.
In later years, Reagan’s conflicts with Japan over semiconductors, the EU’s ‘banana wars’, and Bush’s steel-related tariffs reflect a recurring theme of protectionism entwined with diplomacy.
modern implications and future outlook
Despite historical precedents, Trump’s broad tariff strategy is unprecedented in scope. Of particular note, the heavy emphasis on economies deeply integrated with the US, such as Canada and Mexico, poses unique challenges.
While Mexico and Canada offered temporary measures like deploying soldiers to curb unauthorised immigration and drug trafficking in response to Trump’s threats, China has taken a more adversarial stance with retaliatory tariffs.
Moreover, Trump isn’t stopping at these three nations. He has eyed the European Union and India for potential future tariffs, a move which threatens to ignite a broader, more complex global trade conflict.
Global markets are on edge, and while some, like the UK-based research firm Oxford Economics, believe the US can avoid a deep recession owing to these trade skirmishes, the sentiments aren’t uniformly optimistic. The lasting impacts may well depend on ensuing negotiations and retaliations, as noted in numerous historical episodes.
related resources
A look back helps shed light on the trajectory following such economic measures, which have historically led to unintended repercussions such as trade deficits, stilted imports, and national discontent. For further insights and real-time updates, follow The Business Standard’s Google news channel.
