By DAR Wong
In today’s world, we are not just being threatened by a typical military warfare but also face two other high degree menaces in cyberwar and trade war. The latter two may not kill physical human beings but can destroy the enemy’s economy many times worse than the conventional ways.
In early March, US President Trump announced the import tariff on steel and aluminium of 25 percent and 10 percent respectively. Initially, many observers thought China will be the first to retaliate since it is a huge producer of industrial metals for the export markets. Ironically, the biggest exporters of steel and aluminium metals to America are European producers!
After the groundbreaking news, metal prices fell across the globe and stock indices plunged. On the following day, the chief economic advisor of Trump administration – Gary Cohn resigned. Prior to joining politics, he has served as the President of Goldman Sachs since 2006. After he was invited to join Trump’s team in 2017, Cohn has been a hardcore fighter for free trade policy and he pushed hard for the tax reform to materialise last December.
Just like Elon Musk, founder of Tesla Motors, who left Trump administration after the President withdrew the US from Paris Climate agreement, Cohn upholds his belief and refuses to seek political advancement by compromising his ideology.
Despite President Trump revising his tariff system to exclude Canada and Mexico after three days, many allied countries still displayed displeasure for US trade protectionism. Before China’s complaint, European Commission declared that it will raise import duties on US bourbon, peanut butter, cranberries and orange juice, if the US continues on slapping tariffs on steel and aluminium in coming weeks.
Likewise, China has been the largest importer of transport equipment, computer and electronics, agriculture and poultry, and chemicals from US manufacturers and producers. Based on 2016, the export value from the US to China amounted to US$115.8 billion. As a result, a backlash from China would definitely trigger a global trade gridlock.
Indeed, a universal trade war is already in the making. From another perspective (perhaps Trump’s), a global trade war is a prelude to a weaken US Dollar, as US exports become more favourable to imports in coming months. It will not be too long to see an imminent rise in commodity prices and that will benefit the US economy, given that the US is the largest shale oil producer in the world.
While most people are criticising Trump, it will take a little while for the world to find out if the US will emerge as a true winner. Stay tune for our next update.
~ DAR Wong is a registered Fund Manager in Singapore. The opinions are solely at his own. He can be reached at firstname.lastname@example.org