Financial Times: US Tariffs Threaten Global Economy

A trade war is underway, and the US president may next target German carmakers – even though his first round of trade tariffs has already provoked retaliation, increasing steel prices and making US products less competitive, prompting one US motorcycle company to announce plans for shifting some production overseas. “Cutting one’s own car manufacturers off from specialist imported components is a spectacularly stupid move,” notes the Financial Times. Tariffs contributed to the 1930s Great Depression, and China and Europe can deliver swift targeted retaliation today. The good news is that supply chains and diverse markets provide buffers: The article concludes; “Even a full-blown trade war, with tariffs on all goods worldwide raised to 10 per cent, would reduce global GDP by less than 2 per cent. But more damaging than the immediate threat is likely to be the longer-term impact on innovation and productivity. Modern supply chains are not just disaggregated production lines.” Trade problems require nuanced fixes rather than destruction of the global trade system. Trade battles could continue. Leaders target supporters lacking in economic literacy with populist messages and then struggle to back down. – YaleGlobal