Well, says Trump, who insists that “trade wars are good, and easy to win”. Just last Friday, the US followed through on months of tariff threats, imposing duties on $34 bn in Chinese imports. In a tit for tat move, China also implemented duties proportionately, commenting that the Trump has just “launched the biggest trade war in economic history so far”. Both sides seem to offer no sign of any willingness to start any negotiations, with Trump already threatening to impose more tariffs which could amount to $500 bn worth of Chinese goods. Chinese Premier Li Keqiang made it clear that “trade war is never a solution”, insisting that China will only retaliate to protect its economic interests if provoked.
So, does it matter to me?
As these tariffs are on the global scale, one might imagine $34 bn to be a rather large number, but considering the total imports for US from China last year ($500bn), and the US economy itself ($20 tn in 2018), $34 bn does not seem that big anymore, does it?
This feels like a lot, but economists are saying that they do not expect large impacts out of the affected sectors. Paul Krugman explained that an all-out trade war may lead to a 70% reduction in global trade, but may only harm the world GDP by 2-3% only. He also revealed that, interestingly, the Trump tariffs on China are overwhelmingly on intermediate goods, or on capital goods like machinery. On the other hand, China’s tariffs are mostly on final goods, including agricultural products. Experts are claiming that the Trump tariffs are badly designed, and may “inflict maximum damage on the US economy, for minimal gain”.
Back here at home, Minister for Trade and Industry Chan Chun Sing explained that the authorities expect a “modest” net impact on Singapore, assuming that the situation stays as it is. The greatest danger to Singapore would be if the trade conflict escalates, which could result in cumulative long-term complications.