Global trade war looms, but tariffs are not necessary the best weapon for that war.
Prepare for the looming prospect of a trade war, set to unfold on a global scale. Tariffs are poised to become the primary weapon in this economic conflict, necessitating a clear understanding of their implications.
Donald Trump's potential return to office is a significant catalyst for this strife. Leading in presidential polls, Trump pledges to impose even larger tariffs than before: a hefty 60% tariff on Chinese goods and a 10% tariff on all imports worldwide. Such measures are almost certain to trigger retaliatory actions from countries worldwide.
However, the root cause of this impending trade war lies in China's response to its economic downturn. Faced with a collapsing property industry, which constitutes a significant portion of its economy, China seeks to boost its export manufacturing sector to offset declining domestic demand.
Chinese authorities are actively promoting this agenda by providing substantial subsidies and cheap loans to favored export-oriented industries. They are instructing companies within these sectors to ramp up production significantly. From lithium-ion batteries to electric vehicles and solar panels, China is channeling resources into key technologies, aiming to make them economic cornerstones. Despite challenges, such as export controls impacting chipmakers, China is expanding production, especially in areas like foundational processor chips.
The downside is that amidst China's economic slowdown, its domestic consumption remains subdued. Consequently, the surplus of manufactured goods, including cars, batteries, chips, and steel, is likely to flood the global market at reduced prices (causing a massive era of deflation). This, in essence, constitutes a form of dumping, as China's subsidies artificially deflate the prices of its exports.
Nations worldwide fear the detrimental impact of this flood of cheap Chinese goods on their domestic industries. Consequently, moves towards imposing tariffs on Chinese imports are gaining momentum globally. However, such actions are met with swift Chinese retaliation, as evidenced by various ongoing investigations and tariffs imposed by countries like Britain, the EU, India, Mexico, and the United States.
Even figures like Elon Musk, who have vested interests in China, acknowledge the threat posed by Chinese competition. Musk warns that without trade barriers, Chinese automakers could dominate the global market.
With the possibility of tariffs looming large, questions arise regarding their effectiveness and who stands to bear the brunt of their consequences.
Insights gleaned from recent encounters with Trump's tariffs provide valuable guidance for addressing these inquiries. The streamlined sequence of tariff implementations during Trump's administration has led to a depreciation of the dollar.
Prepare for the looming prospect of a trade war, set to unfold on a global scale. Tariffs are poised to become the primary weapon in this economic conflict, necessitating a clear understanding of their implications.
Donald Trump's potential return to office is a significant catalyst for this strife. Leading in presidential polls, Trump pledges to impose even larger tariffs than before: a hefty 60% tariff on Chinese goods and a 10% tariff on all imports worldwide. Such measures are almost certain to trigger retaliatory actions from countries worldwide.
However, the root cause of this impending trade war lies in China's response to its economic downturn. Faced with a collapsing property industry, which constitutes a significant portion of its economy, China seeks to boost its export manufacturing sector to offset declining domestic demand.
Chinese authorities are actively promoting this agenda by providing substantial subsidies and cheap loans to favored export-oriented industries. They are instructing companies within these sectors to ramp up production significantly. From lithium-ion batteries to electric vehicles and solar panels, China is channeling resources into key technologies, aiming to make them economic cornerstones. Despite challenges, such as export controls impacting chipmakers, China is expanding production, especially in areas like foundational processor chips.
The downside is that amidst China's economic slowdown, its domestic consumption remains subdued. Consequently, the surplus of manufactured goods, including cars, batteries, chips, and steel, is likely to flood the global market at reduced prices (causing a massive era of deflation). This, in essence, constitutes a form of dumping, as China's subsidies artificially deflate the prices of its exports.
Nations worldwide fear the detrimental impact of this flood of cheap Chinese goods on their domestic industries. Consequently, moves towards imposing tariffs on Chinese imports are gaining momentum globally. However, such actions are met with swift Chinese retaliation, as evidenced by various ongoing investigations and tariffs imposed by countries like Britain, the EU, India, Mexico, and the United States.
Even figures like Elon Musk, who have vested interests in China, acknowledge the threat posed by Chinese competition. Musk warns that without trade barriers, Chinese automakers could dominate the global market.
With the possibility of tariffs looming large, questions arise regarding their effectiveness and who stands to bear the brunt of their consequences.
Insights gleaned from recent encounters with Trump's tariffs provide valuable guidance for addressing these inquiries. The streamlined sequence of tariff implementations during Trump's administration has led to a depreciation of the dollar.