The current trade wars are hardly the first or even the worst bout of protectionism in US history, but the current political environment is posing unprecedented challenges for businesses, Soumaya Keynes, US economics editor for The Economist, says in the latest edition of the Macro Musings podcast.
“Donald Trump, I think, poses a more systemic threat, in that you're at the whim of his Twitter feed, essentially,” she says. “He's shown willingness to use tariffs as a lever against anything, and that is tough for businesses to deal with.”
So far, Trump has slapped or threatened import taxes of up to 30 percent on all Chinese-made goods, plus levies against steel and aluminum from most countries.
“If you look at the actual dollar amount of the tariffs, they're just not that big.” But Keynes points out that “the tariffs are a selective, discriminatory tax increase on some things, but if they were only that, then they would be fairly manageable. You can argue about whether businesses had enough notice.”
Keynes continues: “the bigger thing, and the big unknown, is the effects that the uncertainty will have. And it's not just the uncertainty of ‘will he raise a tariff of 25 percent next month or not.’ it's the uncertainty of ‘what else?’ Could it be any kind of any tariff on anyone? But also, could he start going further? Could he get bored of tariffs? Could he start using other laws to restrict contact with foreign companies? This use of tariffs, it was unthinkable, I think, however many years ago, and he's shown great willing to just completely upset or change that norm, so what other norms could he change? That kind of bigger uncertainty, like we don't know what we don't know, I think that is the bigger weight on the global economy right now.”
For more, tune into the most recent episode of the Macro Musings podcast.
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