Analyst says US tariffs may lead to trade wars, rising costs

The Manila Times

Analyst says US tariffs may lead to trade wars, rising costs  US tariffs may lead to trade wars and rising costs across the globe, an analyst said on Sunday (February 2).  US President Donald Trump signed an order on Saturday (February 1) imposing hefty new tariffs of 25% on goods from Mexico and Canada and 10% on imports from China, potentially disrupting more than $2.1 trillion worth of annual trade.  The trade tensions have already escalated with Canada and Mexico retaliating to fight back with their own counter tariffs, sparking a potentially damaging trade war between the key economic partners.  REUTERS VIDEO  Subscribe to The Manila Times Channel - https://tmt.ph/YTSubscribe   Visit our website at https://www.manilatimes.net   Follow us:  Facebook - https://tmt.ph/facebook  Instagram - https://tmt.ph/instagram  Twitter - https://tmt.ph/twitter  DailyMotion - https://tmt.ph/dailymotion   Subscribe to our Digital Edition - https://tmt.ph/digital   Check out our Podcasts:  Spotify - https://tmt.ph/spotify  Apple Podcasts - https://tmt.ph/applepodcasts  Amazon Music - https://tmt.ph/amazonmusic  Deezer: https://tmt.ph/deezer  Tune In: https://tmt.ph/tunein  #TheManilaTimes #worldnews  #tradetensions

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00:00this is actually one stone, three birds scenario. The first bird is basically,

00:06is of course the coffer, right? You want to fill the coffer with additional money at the moment

00:10with the plan to cut tax, right? So basically, this is going to lead the government with a big

00:17budget deficit to fill. The second thing, of course, is to align with the U.S. immigration

00:26policy, right? You're going to tighten border control, reduce illegal immigrants. And of course,

00:32the third thing is basically to fulfill the campaign promise, right? Under the campaign

00:38trail, basically Trump promised that they're going to, the Republican body, if we elected,

00:44we're going to basically impose tariffs on those nations. These actions taken by the U.S. government,

00:52we're going to increase the overall economic uncertainty in the world. There are going to be

00:59quite some market volatility coming in because we understand that actually U.S. threatened

01:06the trading partners that if they retaliate, U.S. were going to impose even higher tariffs

01:12on those countries. So we may see a series of trade war and conflicts, and this may actually

01:18increase the world economic uncertainty. And actually, there will be some economic protectionism,

01:25trade protectionism coming in. Those governments already announced their retaliation measures,

01:30right? If U.S. further react to those retaliation measures, you will see basically a repeating

01:35games of kind of imposing tariffs among the trading partners. U.S. actually import a lot

01:42of goods in, for example, automobiles, consumer electronics, food and energies from the trading

01:48partners, the three trading partners, right? So now the tariffs basically make those companies,

01:56they import goods to the U.S., they need to pay additional tax, basically. And most likely,

02:01this additional tax is going to be passed to the consumers in the U.S., right? Average U.S.

02:05household is going to see their annual expense increase by about 2,600 U.S. dollars. 2,600 is

02:12a large amount, I would say, for an average U.S. household with 30 to 50 million, I'm sorry,

02:1830 to 50 thousand dollars of annual income. So this expense is going to be quite significant.

02:24And I would say this will also add to the inflation pressure in the U.S. So for U.S.,

02:28I think that's the reason why Trudeau says that the U.S. consumer is going to suffer.

02:32So if you look at those automobiles, right, being sold in the U.S. market, actually,

02:40a lot of those parts and accessories actually was imported from Mexico.

02:44Basically, U.S. car makers may consider basically reorganizing their supply chain

02:53and perhaps purchasing goods, parts and services from other countries, right? So this is going to

03:00have a big blow on the Mexican economy. And I would say if this is a repeat again, right, if

03:07Mexican retaliate and then U.S. impose an even higher tariff, then actually this would be

03:13significant blow, a significant impact on Mexico compared to U.S.

03:17Because U.S. is a much larger economy, China basically, the trade war may actually,

03:23in some sense, may be good because, you know, China is currently under deflation pressure.

03:29So this making the imported goods more expensive may actually,

03:34may in some sense, actually benefit the domestic manufacturers in China.

03:39So in a sense, it may actually help counter the deflationary pressure.

03:44So it may not be a very big kind of a blow to China, I would say, especially in the short term.

03:50But in the long run, if the conflict escalates, of course, the Chinese economy is going to suffer

03:55as well. I would expect China to retaliate against the U.S. by imposing also kind of a 10 percent

04:02tariff on Chinese, on U.S. imports. And China may actually, China has another lever.

04:07China may actually restrict export of rare earth metals to the U.S., which we're going to,

04:13because this is heavily used by technology companies and defense industries in the U.S.

04:18So this restriction of rare earth metals would be another lever that China could use.

04:23Previously, U.S. through these big alliances would be able to say a lot of things about

04:29about about the world economy. But now, given this national protectionism,

04:34given this segmentation, actually China may have more leeways, more strategic pathways to basically

04:41establish alliances with the EU, with Canada, with Mexico, etc. So I think, yeah, it would,

04:50yeah, things may play in a way that the world may be more segmented. There are more

04:56powers emerged, yeah. I would say the world is entering into a period of high uncertainty.

05:03We don't know what's going to happen, and the economic uncertainty is going to be high,

05:07stock market volatility is going to be high. And with this trade war, it will come with

05:13inflation pressures on all countries. Previously, we know before 2018, right,

05:18the world economies are getting more and more closely integrated, right? People are talking

05:22about global supply chain, the global economy. Basically, we are all citizens of the earth.

05:28But now things are totally different, I would say. Now, the world economy becomes more and

05:33more segmented. And this trade war, these mutual blows of tariffs against each other...

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