- S. President Donald Trump stated that trade wars are good and easy to win. These words, used in the context of the decision to impose import duties on steel and aluminium, led to the announcement of appropriate steps by the EU authorities. The European Commissioner for Trade has threatened to include restrictions on selected American products. The list would cover individual food items, and among them... peanut butter.
An example of this sweet addition to sandwiches may have entertained some and caused the impression that we are dealing with a storm in a glass of water. The image is slightly changing, given the resignation of economic advisor Donald Trump. Everything points to Gary Cohn wanting to protest Washington's confrontational position. Everything can be underestimated, but fears remain.
National interest in the election campaign
Donald Trump's election campaign was controversial, and his victory sparked some concern. There were concerns about leaving the modern free market economy. The future president blamed some foreign partners for using unfair practices that increase the American budget deficit. It was difficult to predict to what extent similar views could translate into changes in economic policy.
According to the U.S. President, imports of steel and aluminium are currently affecting national security. The establishment of customs barriers is intended to protect the domestic metal production sector.
However, this does not mean that the local industry will benefit from this. This is due to the fact that the US steel industry employs much less people than other sectors of the economy dependent on the prices of this raw material. Import duties mean higher prices. They can increase the income of a narrow group of companies and at the same time make it more difficult for a wider group.
Reaction and escalation
The announcements of US import barriers have triggered a reaction not only on the EU side. Brazil and Mexico, among others, began to consider similar steps. In the end, Trump decided that the latter country, along with Canada, would be protected from new barriers, and other countries could also seek such a privilege. But that was not enough to ease the mood.
The new trading strategy has met with considerable criticism in the US. Nor did politicians from the "his" Republican Party spare the President. The EU Trade Commissioner, when asked about the possibility of a trade war, advised caution in using this term. There are many indications that Trump's real goal was to hit China. However, the form and content of the entire operation was not diplomatic and caused far too much unnecessary emotions.
The Great Trade War, fortunately unlikely
Serious trade wars and protectionism occurred last time during the great crisis of the previous century. The effects were rather opposite of the intended ones. Artificial barriers not only protected national businesses, but also caused mass bankruptcies of companies who wanted free economic exchange. From this perspective, it is difficult to imagine that American steel and aluminium duties will cause a huge avalanche.
The demands to defend the local market from foreign capital are a manifestation of an anachronistic economy and contrary to modern economic thought. However, similar announcements always find supporters during the campaign. If you can advise the European Union authorities, it is above all a cool look and refrain from hitting American peanut butter.