Global trade has faced numerous challenges in recent years, from the impact of the pandemic to issues like piracy and impassable canals. Now, a new obstacle has emerged in the form of a tariff war initiated by Donald Trump as part of his ‘America first’ agenda. The implementation of higher tariffs on imports from countries like Canada, Mexico, and China has caused turbulence in global markets and raised concerns about the state of the US economy.

As the tariff war escalates, the focus is expected to shift towards the EU and the UK. The EU, in particular, is at risk due to its large trade surplus with the US. Research shows that the EU imposes higher tariffs on US imports than vice versa in several sectors, making it a likely target for retaliatory measures. The US may adopt a range of tactics, including universal tariffs or sector-specific duties, to address what it perceives as unfair trade practices.

The impact of the tariff war extends beyond trade barriers. US foreign investment levels are likely to decrease as companies prioritize domestic production. Countries have various options to respond to the tariffs, including increasing purchases of American goods, making concessions, or imposing their own tariffs. The potential consequences of the tariff war, such as inflation, reduced GDP growth, and market volatility, will depend on the scale and duration of the duties and any retaliatory measures taken.

Overall, the future of global trade remains uncertain as the US adopts a more aggressive stance. The lack of diplomacy and consideration for the consequences of these actions could have far-reaching implications for economies around the world. It is essential for businesses and policymakers to monitor the situation closely and be prepared to adapt to the evolving trade landscape.