Can Washington Avoid Casualties Of A Trade War?

As the ominous clouds of an impending trade war between the US and China looms large, serious questions of justifications of this kind of a step are being raised in several quarters in the US itself.

- Kingshuk Banerjee

 While some experts are of the opinion that the US has squandered away the advantages it had enjoyed in the 50’s owing to its lacklustre attitude towards adopting new technology, the inland water barge operators are already feeling the heat.

Moreover, US ports would likely be hurt by retaliatory tariffs on agriculture by China and the European Union (EU), as well as the steel and aluminium tariffs since these products are important cargoes at coastal ports and the Great Lakes.

As per the US banking sector, imposing 25 percent tariffs on steel imports and 10 percent tariffs on aluminium imports could reduce the US gross domestic product (GDP) by a quarter-point over the long term, but that impact could be 10 times bigger if other countries respond in kind.

It’s been noted that the EU and China have already announced possible tariffs of their own – GDP could take a 3.49 percent long-term hit. In addition, it is estimated that productivity in the US could decline by 1.65 percent.

Think-tank’s bashing

The American Institute for International Steel (AIIS), a pro-free trade think-tank, after assessing the fallout of a possible trade war, concludes that steel imports create $240 billion in American economic activity annually, along with 1.3 million American jobs. About 1.2 million of these are related to the importers and users of the raw steel, and about 26,000 are directly generated by port activity.

Many US-based steel buyers – contractors, manufacturers and others – oppose restrictions on steel imports, arguing that new limits would impact the availability and price of raw steel. At worst, some manufacturing interests assert that it could force them to move their operations out of the country.

In addition, many of these steel consumers claim that more American jobs are created in the supply chain and the use of steel than in its manufacturing.