Since the day he took office, U.S. President Donald Trump has continued to push the boundaries of the global economic-political system with his statements and steps against its established rules. Finally, the heavy customs taxes that he stated to intend to bring to imported iron-steel and aluminum products in the last week have sparked debates in the international economic circles, as if he opened Pandora's box. Trump, stating that U.S. companies and their labor force have always lost against friends and enemies at trade agreements signed by the previous White House administrations and the country has thus lost its iron and steel and aluminum sectors, with the slogan "Make America Great Again," points out that it is time for change. During the almost 10 years since the global financial crisis of 2008, it is obvious that a currency war is being experienced between countries with substantial weight in global competition such as the U.S., EU, Japan and China over the expansionary monetary policies of the central banks.
Countries with economies locally trapped preferred to make their money with lose its value with eased monetary policy in order to provide themselves a maneuver area with their exports to the world, and this is why from time to time we observed serious fluctuations in the parity values of the dollar, euro, yen and yuan currencies against each other. Following mutual reactions, they have limited the conflict over the central banks by reducing the "dosage" of the "currency war." Later, starting from the heavy tax penalty from the EU wing to Apple in response to the billions of dollars of emissions fees for the German automotive giants, the U.S. included Britain in the climbing "trade wars" between the U.S. and the EU. With Trump taking office, as in the case of him canceling the process regarding the Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (TTIP) believing that they have no benefits to the U.S., he forced Canada and Mexico to renegotiate the North American Free Trade Agreement (NAFTA).
However, Trump's main problem is the fact that there are sectors positively affected as well as sectors that are negatively affected by international trade agreements.
For the G20 countries also including Turkey, international trade agreements include as much opportunities as challenges. As in the case of sectors negatively affected, the national companies of the country and their employees who are positively affected are also the citizens of the country. For this reason, how fair and constitutional is it to harm other companies of the country while trying to protect a group of sectors and firms of the same country?
Besides, protecting these sectors and firms that cannot produce enough to meet the total demand of the country with this kind of high customs walls, in addition to rendering imports expensive, quickly spoils the domestic countries and encourages them to do high price increases, which reverts back to the country as production inflation. While the U.S. firms cannot produce the steel pipes needed for the oil and gas pipelines, will Trump be able to take on the U.S. oil companies' lobby and the World Trade Organization (WTO)?
Retaliation is escalating
Organizations such as the WTO and the International Monetary Fund (IMF) perceive President Trump's statements as a new and serious risk to the world economy which for the first time in the post-2008 global financial crisis has caught up with a recovery process, and to global trade. While the WTO's General Director Roberto Azevedo stated that if Trump would take such a step, he would take on a serious risk to enter an economically damaging trade war, IMF President Christine Lagarde said other countries' response to the U.S.'s plan with new customs tariffs will have serious macroeconomic effects. Lagarde pointed out that countries such as Canada and Germany will be the most affected by this conflict.
The European Commission has also announced the preparation of a step toward Trump's decision. Accordingly, there are additional customs taxes on the agenda that will affect EU's imports of steel, clothing, textiles and footwear, and certain industrial products from the US. President Trump, developing a new attitude toward the EU Commission's position, has threatened to apply customs tariffs to European-made automobiles after iron and steel and aluminum. While the giants of the EU automotive industry pointed out that this decision would adversely affect everybody, some companies stated they could adapt to such a situation.
Meanwhile, Turkey stated it would act together with the EU on behalf of the WTO, against the threats President Trump repeatedly put forward. In the coming days, we will observe how the attitude of China and Japan will be shaped. Meanwhile, it seems like the EU will file a lawsuit in the WTO court in Geneva against the U.S. by forming coalitions with countries such as Turkey, Japan, Canada and Mexico with which it shares the same views.
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