Donald Trump’s economic agenda in his second term is heavily built on the policy of trade and focuses largely on targeting China. The President-elect has threatened to impose tariffs on a myriad of imports, which are seen to cut China hugely. However, even the United States’ allies will not be immune to the harm caused by his proposed measure on tariffs.
During the campaign, he promised to use tariffs to revive American manufacturing and protect various domestic businesses. He pledged to introduce 60 percent tariffs on Chinese goods and up to 20 percent on other countries’ imports. Due to their scope, these tariff proposals have sparked intense debates among economists and trade experts, who later commented on the potential global economic impacts.
Impact on Trade Relations with Europe
As such, while most of Trump’s tariff strategy goes to China, no European country will go scot-free from the pinch. Texas Christian University’s Associate Professor in Economics, Dr Rishav Bista, had a few words for Newsweek on the overall impacts of Trump’s plan: “While the policy is primarily expected to affect trade with China, it will also have some impact on the United States’ relationship with Europe when it comes to trade.”
The European Union, being one of the world’s largest trading nations and closely tied with the U.S. in terms of economic activities, would also suffer at the hands of Trump’s policies. According to Edward M. Feasel, president of Soka University of America, “huge impact expected on exports and could well dampen GDP growth in allied countries, including those in Europe.”
Economic Impact on China
China will lose the tremendous amount, according to the tariff proposals put forth by Trump. Its economy would stand to potentially lose $34.2 billion in a “fully-fledged trade war” between 2025 and 2026. Under a more moderate “contained trade war” scenario, the figure may be significantly lower but still huge, at $125.3 billion overall.
European Losses Could Match China’s
Europe’s economy would not fare much better. According to the Allianz Trade model, the Financial Times opines that the European countries will lose an amount of up to $38.6 billion in the coming years. In an extreme scenario, with ratcheted rates up on Chinese exports of 60% and on imports from other nations, the loss for Europe might balloon to $124.8 billion. The economic loss for China and Europe would be colossal because it affects mainly their trade flows with the U.S.
The Road Ahead: Congressional Approach
Though the tariffs form the central plank of the President-elect Trump’s economic program, if such steps are to be undertaken, they would have to clear Congress’s hurdles before having a possibility of implementation. The economists are already bracing themselves for the potential fallout of the tariff policy. They have foretold a more fragmented global trading world, considering these proposals may eventually see the light of day.
Trump’s tariff plan may escalate and bring deep disruptions across the global economy; there is a potential for a sea-change in not only U.S.-China relations but also the more fundamental nature of the global trading system. Its partners will have to grapple through the uncertain waters of rising tariffs and economic disruption it triggers.
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