The votes have been counted and the result has been confirmed, if all goes to plan then Donald Trump will be inaugurated as the new US president on January 20th, and global trade leaders await!
Throughout his campaign to become president, Trump has said he will increase import tariffs for products entering the US, suggesting tariff hikes of up to 60% from China and 10-20% from the rest of the world. At one point he is quoted as saying “Tariff is the most beautiful word in the dictionary” adding “It’s my favourite word.”
While there are suggestions that he will not to impose such harsh measures, he does have a history of aggressively lifting tariffs. In his last term as president, he imposed more than $400 billion of tariff increases on Chinese products, along with targeting other countries and raising rates for specific industries, such as steel.
Therefore, in many parts of the world, countries will be waiting to see whether he carries through with these threats after he takes up office in January.
China
The impact these hikes will have on China is plain to see, a 60% tariff increase would dramatically increase the cost of Chinese products in the US. Transpacific business is the world’s largest market and by comparison ocean freight volumes are around 15% higher than those of the Asia/Europe trade.
It is not inconceivable that some tariff hikes are introduced ahead of Chinese New Year, which starts just 9 days after Trump is due to be sworn in, and could have a far reaching impact on global trade from early next year.
Europe
Trump has also thrown the gauntlet down to Europe, quoted as saying “The European Union sounds so nice, so lovely, right? All the nice European little countries that get together…They don’t take our cars. They don’t take our farm products,” he added “They sell millions and millions of cars in the United States. No, no, no, they are going to have to pay a big price.”
According to some reports, the EU are already drawing up lists of retaliatory actions against the US, after not taking Trump’s tariff threats seriously enough during his last administration, threats which he later followed through.
UK
The US is the UK’s largest trading partner. It will be interesting to see what the UK government does if the 10-20% rest of the world tariff hike is imposed on British products, would they retaliate and impose the same on US imported products?
Alternatively, the UK could be in a difficult place as it continues to get closer to the EU, including aligning food and farm standards. A US/EU trade war could make things very complicated, especially if the UK was seen to be closing a beneficial trade deal with its friends across the Atlantic.
Of course, the new president may not be as belligerent on tariffs as he has himself stated, but he has certainly got global trade leaders paying attention!
