Will Trump’s win spark a global trade war?

Donald Trump vowed on his campaign that he would levy all goods imported into the US if he won back the White House. Following his win, businesses and economists around the globe are scrambling to work out how solemn he is.

Trump sees tariffs as a way of growing the US economy, protecting jobs and raising levy turnover.

In the history, he has targeted tariffs at person countries such as China or sure industries, for example steel.

But Trump’s election campaign pledge to impose taxes of 10% to 20% on all foreign goods could affect prices all over the globe.

Last month, he appeared to single out Europe.

“The European Union sounds so enjoyable, so lovely, correct? All the enjoyable European little countries that get together… They don’t receive our cars. They don’t receive our farm products,” he said.

“They sell millions and millions of cars in the United States. No, no, no, they are going to have to pay a large worth.”

BMW, Mercedes and Volkswagen shares all fell between 5% and 7% after Trump’s win confirmation. The US is the single biggest export trade for German carmakers.

During his campaign, Trump said tariffs were the respond to myriad issues, including containing China and preventing illegal immigration.

“Tariff is the most attractive word in the dictionary,” he said. It is a weapon he clearly intends to use.

While much of this rhetoric and action is aimed at China it does not complete there.

Some jurisdictions like the EU are already drawing up lists of pre-emptive retaliatory actions against the US, after ministers did not receive seriously enough Trump’s earlier threats of tariffs, which he later imposed.

G7 finance ministers told me last week they would try to prompt a Trump-led America of the require for allies in the globe economy because “the concept is not to launch a trade war”.

However if “a very powerful broad power is used”, Europe would quickly consider its response.

In the history the EU imposed tariffs on iconic American products such as Harley Davidson motorcycles, bourbon whiskey and Levi’s jeans in response to US duties on steel and aluminium.

A top Eurozone central banker told me US tariffs alone were “not inflationary in Europe but it depends on what Europe’s reaction will be”.

Last month the IMF told me a major trade war could hit the globe economy by 7%, or the size of the French and German economies combined.

There are very large questions for the UK government about where exactly the post-Brexit UK should seat itself in a plausible, if not sure, transatlantic trade war.

The path of trip until now for the UK has been to get closer to the EU, including on food and farm standards. This would make a close trade deal with the US very challenging.

The Biden administration was uninterested in such a deal. Trump’s still highly influential top trade negotiator Bob Lighthizer even said an assumption that the UK would remain close to the EU to assist its own businesses had prevented him from pursuing a deal.

“They are a much bigger trade associate to you than we are,” he told me in an interview.

The UK could try and remain neutral, but would battle to avoid the crossfire, especially for the goods trade in pharmaceuticals and cars.

The rhetoric from the UK government suggests it could try to be a peacemaker in global trade wars, but would anyone listen?

Britain could pick a side, by trying to be exempted from more general Trump tariffs.

Diplomats have been heartened by more pragmatic economic advisers to the President-elect suggesting that amiable allies might get a better deal.

Or would the globe advantage more if the UK joined forces with the EU to head off the application of such trade tariffs?

Away from the US, what about the example to the rest of the globe?

If the globe’s biggest economy is resorting to mass protectionism, it’s going to be challenging to convince many smaller economies not to do the same.

All of this is very much up for grabs. Trump’s warnings can be taken at face worth. Nothing is sure, but this is how very solemn trade wars can commence.