Trump's tariff upheaval: Global trade faces inevitable chaos
The decision by U.S. President Donald Trump to impose tariffs represents the most significant change in global trade in a century, according to BBC News economic editor Faisal Islam. In a commentary published Thursday on the BBC's website, he argues that a global, albeit chaotic, trade war seems inevitable.
Islam notes that two charts illustrate the significant impact of American tariffs on the world economy: declines in stock markets, particularly in Asia, and the surge in American tariff revenues, which have reached levels not seen since the 1930s.
Here are the consequences of Trump's decision
He emphasizes that Trump's decision will particularly disrupt global trade channels. He predicts that the implementation of American tariffs will "break the business models of thousands of companies, factories, and possibly entire nations."
Some of the supply chains created by the world's biggest companies will be broken instantly. The inevitable impact will surely be to push them towards China, the BBC editor adds.
According to him, reducing the U.S. trade deficit "to zero," which is the goal of American policy, implies "a remarkable rerouting of world trade flows."
- Deficits and surpluses are a normal part of a functioning trade system where countries specialise in what they are the best at making. The US has now spectacularly ended that logic. But shifting factories will take years. Tariffs at this scale on East Asia especially at 30 or 40% will hike prices of clothes, toys and electronics much more quickly - Islam notes.
He questions how the world will react to this change. He suspects that some European consumers may boycott products manufactured in the U.S. Additionally, the dominance of large American technology companies in the social media industry could be undermined. This is evidenced by the decline in sales of Tesla cars, owned by Trump adviser Elon Musk. At the same time, U.S. authorities may be compelled to raise interest rates to counteract the inevitable rise in inflation.
New American tariffs
Signed by Trump on Wednesday, the directive imposes "reciprocal tariffs" of at least 10 percent on goods imported from abroad.
For goods from the EU, the tariffs will be 20 percent. The rates announced by the U.S. are intended to offset half of the combined tariffs and non-tariff trade barriers used by other countries.
For China, the tariffs will be 34 percent (this rate will be added to the previously announced 20 percent tariffs, totaling 54 percent), Japan - 24 percent, India - 26 percent, South Korea - 25 percent.
The universal 10 percent tariff rate is set to take effect on April 5, while tariffs on specific countries will take effect on April 9.
