Siah Hwee Ang
An all-out trade war is unlikely, especially one between China and the United States. But the US has been clear that it takes bilateral trade seriously.
So some attempts at addressing that can be expected.
Fewer than three weeks ago, new US tariffs were slapped on to steel and aluminium coming from Europe, Canada, and Mexico.
These nations were exempted when the 25 per cent tariff on imported steel and 10 per cent on aluminium were first introduced in March.
This exemption indicated that the primary target at that time was China.
With the new tariffs now imposed on them, the European Union, Canada and Mexico are likely to retaliate with increased tariffs on various products.
Faced with the same plight, many other countries are filing disputes with the World Trade Organisation over the US actions.
The tariffs in this case mean that products made from steel and aluminium are likely to experience price hikes, which are transferred to both businesses and consumers.
Retaliatory actions from other countries mean US exporters will experience higher costs of exports and that some markets will potentially be less viable for further engagement.
Trade tensions also seep into risk aversion in foreign direct investment.
Global flows in foreign direct investment fell from US$1.91 trillion (NZ$2.75t) in 2015 to US$1.43t in 2017.
More animosity between countries around trade this year is likely to cause collateral damage in foreign direct investment.
Some studies have shown that a country that liberalises its trade regimes is able to accelerate its annual economic growth on average by about 1.5 percentage points, with some lag effects.
So the potential prize for liberalisation is there – little wonder that China has been an active