The threat of a global trade war is back. The Trump administration has announced that the US will impose tariffs on aluminium and steel imports from the European Union, Canada and Mexico. The EU is already promising to respond to Trump’s tariffs in kind.
It is all too easy to see how this situation escalates. The EU slaps tariffs on bourbon and Harley Davidsons in response, an infuriated Trump then hits a slew of EU products with tariffs and on it goes.
The Trump’s administration decision to impose tariffs is a historic mistake. Not only will it make these goods more expensive for the American firms that are using them to manufacture things, it’ll also strain the trans-Atlantic alliance and make it more difficult for the US to persuade these countries that China’s attitude to intellectual property is a genuine problem that represents unfair competition.
There’s also a Brexit angle to this story. Proponents of staying in a customs union with the EU will argue that, at a time of global trade tensions there is little point in setting out into the world in search of new deals—and that it is better in these circumstances for the UK to enjoy the protection of sitting in a large, customs union. But Brexiteers will argue that if the UK stays in a customs union, it risks getting dragged into a trade war between the EU and the US but with no say over how that fight is conducted.
Now listen to James Forsyth and Liam Halligan talk about Trump’s trade war in Coffee House Shots: