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Countries around the world were brought to a state of panic when the US president Donald Trump first announced a 25% tariff on all steel and a 10% tariff on all aluminium imports in March 2018, a move isolating itself from many allies such as the EU. The US later led a China-specific attack by announcing a 25% tariff of $50 billion worth of Chinese goods.
Aimed to boost the national economy and cut trade deficits, it instead led to a series of retaliatory tariffs resulting in a trade war centred around the US and China.
Till now, the US has raised tariffs of 25% on $250 billion worth of Chinese goods.
China currently has tariffs on $110 billion worth of products exclusive to the US, of varying percentages of 25, 10, and 5.
What is a Trade War?
A trade war is an economic conflict between two or more countries caused by creating tariffs or other trade barriers against each other in retaliation.
A tariff is a form of tax imposed by a government on goods and services imported from other countries. A high tariff will result in additional cost onto the imported product, increasing its price thus making it less desirable, especially when compared to untaxed domestic products.
What is the current situation?
Negotiation between the two countries has stalled since May, with no signs of the trade war ending anytime soon. Trump has since then threatened to go forth with the tariffs on the remaining $300 billion of Chinese goods if China’s leader Xi Jinping does not meet up with him at the upcoming G20 summit to discuss the issue.
What are the possible impacts?
As the former Goldman Sachs Group Inc. chief economist Jim O’Neill said, no one wins in a trade war. The trade war will have many negative consequences and drive up prices worldwide.
We will continue to discuss how the trade war will impact many industries and possible solutions to minimize the effects of tariffs on importing costs.