Infinity war on trade

He’s eccentric, lives and breathes in real estate universe. Every move he took in his presidential term, have motivated or rooted in construction background that he got in the last four decades. He rules/manipulates the world via 140-character long tweet messages. As you had enough tips to make a guess, I gave you the name: Mr. Donald Trump, the President of the United States. After a month-long quarrel in the Congress about the Mueller Investigation, President Trump diverted the attention from his dealings to the international trade front: the trade war with China. 

First, the tweets appeared, then the decision to increase the 10% to 25% to USD 200bn selected Chinese goods published on May 9th in the Federal Register, the official gazette of U.S. Government. In a gradually slowing world economic conjuncture like that we’re all in, the increased tariffs will topple the delicate balance in trade to an unmanageable mess. As President Trump made the u-turn of 40 years of trade with China and signaled ‘no-rush’ to fix the issue, the protracted debate about the issue will hurt everybody, including the ordinary voters of Mr. Trump. Also, it may trigger the inflationary pressure in the U.S., with the costs primarily passed along to businesses and consumers through higher prices.

According to a research note from Oxford Economics, imposing tariffs of 25% on all Chinese imports could reduce U.S. growth by 0.3 percentage point, enough to slow U.S. growth to below 2% by the end of 2019. 

Even if confined to the US and China (for now), the Eurozone would be impacted through the trade uncertainty and the foreign exchange front. President Trump’s brinkmanship would mean flat-lining growth in the foreseeable future.

I borrowed the headline from the recent blockbuster full of superheroes; Avengers: Infinity War. Careful not to give any spoilers about the last Avengers movie, I think that the tariff increase is like an ignition of the second phase of the trade war -which started in 2018- between the world’s top two economies. Trade war may go far beyond imagination.