Trump 2.0 Tariff War Is A Recipe For Trade Chaos With No Winners

The victims will include not just the countries that are targeted, but also the US itself.

- Vikram Khanna

As expected, the tariff war is escalating. So far, we've seen a 10 per cent tariff on around US$450 billion (S$603 billion) of Chinese imports on top of those that already existed, to which China has retaliated with 14 per cent tariffs on a range of US goods.

Then last week, US President Donald Trump announced there will be 25 per cent tariffs on around US$50 billion worth of steel and aluminum imports, targeting all exporters of these metals to the US.

For good measure, he also unveiled a plan for "reciprocal tariffs" on various countries, explaining that "if they tax us, we tax them the same amount". So far, he has named India, the European Union and China as targets for reciprocal tariffs, but several other countries could also be in the firing line.

Taken together, these measures - and there may be more to come, including in the form of retaliations - will have far-reaching consequences that would be hugely disruptive for world trade, in which no country would be spared, including the US itself.

The US tariffs on steel and aluminum will hit exporters of these metals, such as Canada (especially), Brazil, China, Japan, Mexico and South Korea. But they will also be a net negative for the US.

Domestic producers of these metals such as US Steel and Alcoa will gain by hiking their prices, knowing that imports will cost more, which would raise inflation. But several industries that use steel and aluminum as inputs will suffer, including carmakers, the aerospace and defense industries, construction companies and beverage and packaging industries, where there will be layoffs. Retaliatory actions could lead to further job losses in sectors that are targeted, which may include agriculture and parts of manufacturing.