A Global Trade War a Reality
The trade war's consequences are far-reaching, with the Budget Lab at Yale University estimating that Trump's current tariff regime would pull down a household's average disposable income by $4,364. As the situation continues to evolve, it remains to be seen how the trade war will ultimately impact the global economy and the lives of individuals around the world.
President Donald Trump's trade policies have sparked a global trade war, with tariffs imposed on various countries, causing uncertainty and turmoil in the market. The US has paused tariffs on most nations for 90 days, but raised tariffs on Chinese imports to 145%, leading to a complex and unpredictable trade landscape.
The trade war has caused significant concerns for small businesses, with the chief operating officer of Kirrin Finch, a Brooklyn commercial apparel company, describing the policies as "unfathomable". The Trump administration's goals for the trade talks include eliminating the $1.2 trillion trade deficit and raising revenues from tariffs to offset income tax cut plans. However, the tariffs have caused a significant cost increase for importers, which will impact consumers and businesses in the form of higher prices.
The Chinese economy may suffer a steeper hit to its gross domestic product than the US, but China is likely to stick to its guns due to internal public support and the ability to increase consumption domestically. The US has a $295 billion trade deficit with China, which gives the US an edge in terms of inflicting pain on China's economy through tariffs. The trade war has expanded with China, with 25% tariffs still applying to imported autos, steel, and aluminum.
As the trade war continues to unfold, its impact will be felt globally, with countries such as Indonesia, Germany, and South Korea expected to be affected. The Indonesian finance minister said that planned US tariffs could deliver a blow of 0.3 to 0.5 percentage points to Indonesia's GDP. The US and global economies have suffered a huge protectionist shock, with former Treasury Secretary Janet Yellen criticizing Trump's tariff policies as "the worst self-inflicted wound that I have ever seen".