Free Trade? Never Heard About of It
Free trade and low tariffs are the fundamental principles the World Trade Organization hinges on.
Even worse, more and more countries are being sucked into the maelstrom of this showdown between the world’s biggest economies.
Washington’s decision to levy tariffs on steel and aluminum imports from Mexico and Canada have rendered null and void its past trade agreements with its two immediate neighbors, forcing Mexico City and Ottawa to respond in kind.
America’s relations with its European allies are no better either. On June 25, the EU said it would charge tariffs of 25 percent on $8.2 billion worth of imported US goods in response to earlier imposed US tariffs on EU steel and aluminum.
As if that were not enough, President Trump has threatened a 20-percent duty on imported European cars, which accounts for a sizeable 10 percent of the overall trade turnover between the US and the EU.
Stunned by Washington’s threat, the EU vowed retaliation.
WTO Woes
Stung by the heavy-handed US behavior, China and the EU have brought the issue of US import tariffs before the WTO. A similar request had earlier been made by Russia.
Meanwhile, with the ongoing trade wars heating up, the world trade body may find itself at the losing end and simply lose its relevance.
In an internal memorandum released ahead of Thursday’s EU summit, the European Commission calls Donald Trump’s aggressive approach a direct assault on the World Trade Organization which, it warns, will unwind decades of progress and return global commerce to a Machiavellian system where might prevails.
Global Recession
Economists warn that Washington’s policy will lead to a “trade apocalypse” that, in turn, will set off a new global recession. Trade protectionism will jack up prices across the board, which will seriously impair the global economy.
READ MORE: Trump Says WTO, TPP Not Serving US Interests, Bilateral Deals More Profitable
On June 15, 2018, the US announced the imposition of additional 25 percent tariffs on $34 billion in annual imports from China and threatened Beijing with an additional $200 billion in taxes.
If Washington makes good on its promise, China will lose 0.5 percent of its annual GDP growth,; but the US economy will still be the first to suffer.
“If we are to have a 'trade war’ with China, it would be best to win it. Unfortunately, the chances of this happening are slim to none because President Trump's plan of attack suggests that everyone, us and them, will lose,” economist Peter Navarro, director of the White House National Trade Council, said.
