Trade war like wallowing in mud – expert

SEOUL: A trade war triggered by US President Donald Trump’s protectionist moves to impose steep tariffs on foreign steel and aluminium would be bad news for all, said a South Korean trade expert, adding that it would bring chaos to the world economy in the worstcase scenario.

“There is no winner in a trade war. It is like wallowing in mud,” Han Jae-jin, a senior research fellow at Hyundai Research Institute, said yesterday.

Han viewed the current trade friction as a war of nerves, not an actual launch of a trade war. But he noted that, in the worst-case scenario, the US could, wittingly or unwittingly, be drawn into a phase of trade war that would bring chaos to the global economy.

He said the Trump administration was unlikely to make the wrong choice as it could damage the global and US economies.

Trump announced plans last month to slap heavier tariffs on imported steel and aluminium from several countries, including China, in an effort to protect US steel jobs and domestic steelmakers.

Han, however, noted that the protectionist moves would not create jobs in the US steel industry as China’s dependence on the US market for steel exports was inconsequential.

The US is the world’s biggest steel importer, and imports such products from more than 100 countries. However, China, the world’s No 1 steel exporter, was 11th among US source countries of steel imports last year, accounting for just 2% of total US imports.

Even though higher tariffs would shrink the US import of Chinese steel, the US manufacturers would seek out cheaper steel imports rather than depend on domestic suppliers.

It would do no good to US producers and job creation in the US steel industry if Trump chose to broaden the imposition of steep duties on many more countries, as it might encourage US suppliers to reduce steel production and cut steel jobs in a bid to tackle higher steel prices caused by higher duties on imports.

Heavier steel tariffs could also rapidly bring inflation to the US economy, as US manufacturers might try to pass higher steel costs on to consumers, prompting the US Federal Reserve to speed up its rate hiking for the rest of the year.

“With the steeper steel tariffs, the US economy will not improve... (the steeper tariffs) mean everybody destroying itself (with retaliatory measures toward each other),” Han said.

He said China and the EU would not sit idle or look on at Trump’s tariff decision, which could spur retaliatory measures and lead to a trade war.

Han saw a low possibility of a trade war taking place owing to the possible chaos wrought on global trade. – Xinhua/African News Agency (ANA)