What Do Trump’s Tariffs Mean for International Business?
Over the last few months, the US and China have been engaged in an increasingly acrimonious war of words over trade – one that has recently tipped over into action, in the form of tariffs.
The tariffs currently being proposed and implemented by both President Trump and the Chinese government have massive implications for international business and trade. Here, we explore what they entail, and what the implications could be for a US company doing business abroad.
Trump’s Trade Tariffs: The Story so Far
Despite his reputation as a vocal proponent of free trade, Donald Trump’s presidential bid included a strongly protectionist slant that has continued into his administration.
In particular, his time in office has been marked by threats to introduce significant trade tariffs against various trading partners, including the UK and EU. The majority of these threats, however, have been directed towards China, who the president accused of having enacted ‘the greatest theft in the history of the world’ through their trade policies.
Last month, the president finally put his promised tariffs into action, announcing $60 billion of tariffs on Chinese steel and aluminium, while simultaneously signalling a reprieve for the EU and various other nations. China responded by introducing its own retaliatory tariffs on US imports.
As the trade row has escalated, the president has begun to threaten a further $100 billion worth of tariffs on Chinese imports, leading many to speculate that the two countries are quickly heading towards an all-out trade war.
Does This Signal the Beginning of a New US-China Trade War?
While the EU and other countries were exempted from the president’s current round of tariffs, an escalating trade war between the US and China would be bad news for any business that sells goods abroad or is planning on expanding internationally. The specific tariffs introduced by China – on products such as US pork, apples and almonds – also suggest that it would be the farming and agricultural industries that would bear the most direct brunt of the row.
In the wake of Trump’s announcement, financial markets responded with alarm, with the Dow Jones dropping by more than 300 points. Several US companies with exposure to China, including Boeing, 3M and Caterpillar, saw significant falls in stock prices.
However, the most positive outcome for businesses would be the avoidance of a trade war entirely. This scenario is now looking more likely, after both China’s president Xi Jinping and the Trump administration struck similarly conciliatory tones. While neither side has yet made any concrete moves towards reducing tensions, both will wish to avoid alienating businesses by entering into a cycle of increased tariffs and import controls.
For businesses engaged in overseas trade, or with an eye set on international business expansion, the current situation is one that demands caution and due diligence, but the long-term implications will not become clear until the dust settles on the latest round of disputes between the US and China. Whether both sides will back down from their current positions, or risk incurring the ire of businesses from both countries, remains to be seen.
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