US Policies Will Ultimately Help China

President Donald Trump's announcement of sweeping tariffs on imports from nearly every country upended the global trading order and plunged markets into turmoil.

- MALEEHA LODHI

It left countries scrambling to respond by either imposing counter levies or seeking negotiations to secure lower rates.

The US stock market lost $5.4 trillion within two days of the announcement while global stock markets lost $5 trillion as fears intensified about a global recession. The prospect of a full-blown trade war shook investor confidence. The IMF warned this would significantly affect already sluggish global economic growth. The head of America's central bank warned increased tariffs would lead to "higher inflation and slower growth".

Using emergency powers, Trump slapped so-called "reciprocal tariffs" on America's trading partners that ranged from baseline 10 per cent to 50 per cent, an action that did not discriminate between friend and foe. The steepest tariffs were imposed on Asian countries with China initially facing 34 per cent (added to previous levies and an additional 50 per cent; it took the net rate later to 104 per cent). The EU was subjected to a blanket 20pc levy.

Trump's justification rested on flimsy grounds—that this would boost the US economy by reducing its trade deficit, bring manufacturing and jobs home, promote investment in the country, raise revenue to finance deep domestic tax cuts, and protect American businesses and workers. Most of these assumptions are deeply flawed, but the Trump administration rejected the view that the measures would hurt US industries and lead to recession and higher prices for American consumers.

The Financial Times described Trump's decision as "one of the greatest acts of self-harm in American economic history". In similar vein,