The Trade War Lands Close to Home

05.04.2018 • France

Simone Wapler – La Chronique Agora (France) –

The “trade war” will only make losers. It risks reviving inflation and pushing long-term rates higher.

We must already be afraid of climate change, terrorism, immigration, artificial intelligence. Should we add on this long list the “commercial war”?

It seems so. This time, it’s serious.

A trip to Africa allows me to reconnect with evidence as old as grants and taxes: protectionism never pays. Far from favoring national production as its henchmen say, it develops corruption and contraband.

If protectionism worked, Congo would be a flourishing country. Customs duties and import taxes are always ultimately paid by us ordinary citizens.

But let’s see this war on the side of the developed countries.

On the US front, the Trump administration has unsheathed heavy artillery:

  • September 2017: 220% anti-dumping duties on CSeries civil aircraft manufactured by Canada’s Bombardier.
  • October 2017: Provisional anti-dumping duties of 97% to 162% on imports of aluminum from China
  • November 2017: 20% customs duty on Canadian lumber.
  • January 2018: beginnings of protection of the solar energy market. The International Trade Commission (ITC) said imports of low-cost solar panels, particularly from China, had hurt the industry. Customs duty 30%.
  • January 2018: customs duties on washing machines (!) Up to 50%
  • March 2018: customs duties of 25% on steel and 10% on aluminum.
  • March 2018: 1,300 Chinese products will be surcharged to 25%

At the end of 2017, the US trade deficit with China reached 375 billion dollars and continues to widen

Trade balance United States China (last 12 months) in billions of dollars

Too bad for the American consumer who will pay more for his houses, dishwashers, cars, multiple items sold by Wal-Mart or Amazon.

According to a study by Natixis, a 20% import tax in the United States would (given the weight of imports) lead to a three-point rise in US domestic prices, pushing inflation above 4 %.

If this study is true, Mr. Market’s anxiety is well founded. Long-term rates will follow, the near-free credit that boils the pot for more than 30 years will become more expensive and we will have a masterful recession.

Any retaliation on the part of China or Europe will only make things worse.

So, yes, the “trade war” is a real threat to our purchasing power as well as to our financial investments.

Except that the term “war” does not go with “trade”.

Trade contributes to peace. People who honestly exchange and enter into win-win deals learn to know each other and to value each other. The “trade war” is simply the dirigisme applied to trade. Like all dirigisme, it is detestable and serves only the statists of right or left.

-Read more at la-chronique-agora.com (French)-

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