Global trade policy formally shifted towards protectionism - ING

The Trump administration’s decision to impose tariffs on US steel and aluminium imports and a $50-$60bn tariff package on imported goods from China – means that global trade policy has formally shifted into the realms of a protectionist world, explains the research team at ING.

Key Quotes

“If countries that are hit do not retaliate to these initial US protectionist measures, the world is ‘only’ facing a one-sided contained trade attack - and not a trade war in our view. In this case, the economic effects are limited - with the Chinese economy hit the most (we estimate a cumulative 0.6% GDP loss over two years). If US imports from China, as well as steel and aluminium imports from a range of countries, are partly substituted by domestic production - we estimate that this could lead to a 0.3% increase in US GDP after two years.”

“Going forward, the immediate risk is whether trade partners seek to retaliate in equal and proportional measures – giving rise to some sort of ‘Tit-for-Tat’ Trade Battle. While reports suggest US and Chinese officials may initially be looking to take a more diplomatic approach, the reality of unsuccessful and challenging trade negotiations means the prospect of significant countervailing measures being imposed by Beijing – beyond the trivial $3bn retaliatory tariffs on imported goods from the US already announced – is fairly high.”