The European Union (EU), China, Canada, Japan and other major countries are showing movements to form a coalition to fight against trade protectionism of the US amidst rising concerns that the world trade war will turn into a form of “US vs anti-US.”
On June 2, President Trump posted on Twitter “If we do not impose customs on goods from those countries, but they impose 25%, 50% even 100% tariffs on our goods, that is not fair and I won’t tolerate it.” He went on to write, “Does that sound like free or fair trade, no it sounds like stupid trade.”
This is his justification for applying high tariffs to products from countries including China, the EU, Canada and Japan using Section 232 of the Trade Expansion Act and Section 301 of the Trade Act. CNN US unveiled that President Trump published the post right before the closing ceremony for G7 Meeting of finance ministers held in Canada.
The EU and other countries appear to be forming an alliance to retaliate against the US. According to Reuters and other foreign media, after the G7 finance minister and bank chairman talks ended, finance ministers of Canada, France, Germany, England, Italy and Japan announced in a statement that they had “unanimous concern and disappointment” in the USA’s action to levy tariffs on steel. They criticized the measure for being a threat to the alliance among G7 member nations and emphasized that they would react in a “determined manner.”
The EU, Canada and other nations have announced that they would impose retaliatory tariffs on the US. The World Trade Organization (WTO) also launched litigations against the US. According to Xinhua Media, Wang Yi, China’s Vice Foreign minister and head of foreign affairs, is expanding the scope of retaliation by getting in contact with leaders of the entire EU and separate nations. His retaliation philosophy is free trade and multilateralism.
As the scope of the trade war is widening, many are showing concerns that the global economy recovery will be stunted. Global research institutes are expecting the rate of increase in trades to drop from last year’s 4.2%, with the International Monetary Fund (IMF) expecting 4.0%, the Organization for Economic Cooperation and Development (OECD) anticipating 4.1%, and the World Bank (WB) also expecting 3.8%.
Concerns are being voiced in the US as well. According to the Financial Times (FT), interest groups by industry argued that the US decision to impose tariffs of 25% and 10% respectively on steel and aluminum products imported from Canada, Mexico and the EU will paralyze the world trade system, discourage investments and cut the number of jobs.
On the other hand, however, some are skeptical that the alliance of various nations against US trade protectionism will function properly. In the case of Italy, solidarity is already dispersing from the administration which is based on anti-EU populism. Germany is not happy with raising tariff barriers against the US.
The issue is that for countries like Korea which relies mainly on exports, the tariff war causes insecurity in the economy. Bloomberg Intelligence (BI) expected Korea’s gross domestic product (GDP) would drop by 0.9% points due to the trade conflicts between America and China. The Korea International Trade Association (KITA) forecasted that if tariffs increase by 10% points among the US, China and the EU, the world trade volume would decrease by 6% while Korean exports would drop by 6.4% valued at US$36.7 billion.