Global turmoil

THE tariffs imposed by the United States and China on goods being traded between both countries is something most people have been expecting but dreading.

The US decided to impose tariff duties on US$60bil worth of imports from China and China retaliated by slapping extra tariffs on US$3bil worth of goods brought into the country.

The action by both countries slammed stock markets yesterday. History has shown that a trade war is a lose-lose situation for countries engaged in such destructive activities and by estimates, it will shave global growth into the foreseeable future.

That amount is, however, small. Just a minuscule percentage will be lost by both the US and China but the worry is reciprocative action that follows. Should the US and China deepen the tariff and duties impose on goods shipped between both countries, then that will have a lingering and possibly longer-lasting impact on global trade.

Corporations that facilitate global trade no longer operate in isolation. Supply chains are deep and throughout the world and punitive action by either and both countries will have a ripple effect in many other countries.

Malaysia can just be a spectator to all of this. Given the openness of the economy, action by both sides will eventually effect business in Malaysia. As it stands, Malaysia will be hit by the higher tariffs on solar panels as Malaysia is among the largest exporters of such goods in the world.

The other worry is the knock-on effect that will happen if the list of goods is expanded into other areas. The US has already voiced its dissatisfaction over the trade imbalance between both countries.

But any trade wars also does not serve the US. Growth will be affected and with jobs the priority for every single government, lasting trade wars will not only chip away at domestic growth and also jobs, and that will be to the detriment of any country and government.