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Trade war looming!

Mar 05,2018 - Last updated at Mar 05,2018

President Donald Trump never ceases to surprise the world with unexpected announcements on a variety of issues affecting his own country, as well as the world at large.

Yet, his recent decision to slam tariffs on imported steel and aluminum has stunned the world and rattled stock markets. Trump wants now to impose a 25 per cent tariff on imported steel and 10 per cent on imported aluminum, ostensibly to protect domestic production of the two metals, which are heavily used in the manufacture of a wide range of US products, including cars.

The immediate reaction of major international traders with the US was to declare their intention to retaliate against the US by imposing their own tariffs on imports from the US.

Economists are divided on the policy of tariffs applied to protect local products from cheaper imports. Some advocate for such a protectionist policy because it does protect domestic products from competition, albeit a fair one.

On the other side of the coin, protectionism per se is unacceptable from the point of view of the greater majority of economists, who regard it as harmful to consumers as products will be manufactured at higher costs.

Free trade and commerce encourages the gradual lifting of tariffs on manufactured imports rather than increasing them as Trump now wants to do. Consumers benefit from lower production costs made possible by allowing the import of materials, like steel and aluminum, with little or no tariffs.

The US president does not see things the way most economists do, including noted ones. Of course, as long as President Trump continues to formulate policies on the basis of “America first”, he is unlikely to mend his ways and his policies, be they economic or political, on a more balanced basis.

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