The World Trade Organization (WTO) on Wednesday said that global goods trade appeared to remain steady in the fourth quarter of 2024 and looked set to continue growing in the first months of 2025, but increased trade policy uncertainty and the prospect of new tariffs could weigh on trade in the medium term.
The cautionary note comes at a time when the US has been sowing chaos in global trade. In recent weeks, the US has been brandishing the threat of tariffs. On Wednesday, the US government officially imposed a 25 percent tariff on all imported steel and aluminum, a move that sent shockwaves through the global economy. Just hours after the tariffs took effect, US President threatened to escalate a global trade war with further tariffs on EU goods, as major US trading partners said they would retaliate against trade barriers, Reuters reported.
This development has not only heightened global trade tensions but also pushed the world to the brink of a full-scale tariff war, with the entire global economy bearing the brunt. The potential consequences of such a tariff war are far-reaching, capable of rippling through international markets, upending supply chains and ultimately leading to price hikes for consumers, thus stifling economic growth.
At the heart of the tariff war is the issue of rising trade costs. The rise in tariffs directly inflates the prices of imported goods, weakening the competitiveness of companies and consequently suppressing the growth of global trade. History has clearly shown that tariff wars often lead to a decline in trade volume. According to the IMF estimate, US-China trade tensions since 2018 decelerated global economic growth for 2019 to 3 percent, its slowest pace since the global financial crisis.
Now, the tariff war has a much broader scope, involving a greater number of countries and posing an even more severe risk of a global recession. The uncertainty surrounding trade policies and the escalation of tariffs is already undermining the confidence of businesses and consumers, leading to a simultaneous decline in investment and consumption. The uncertainty brought by US tariff policies is starting to have a chilling effect across many industries, businesses warn, as consumers pull back on everything from basic goods to travel, Reuters reported on Tuesday.
The US tariff policy is grounded in a “zero-sum mentality,” wrongly assuming that one country’s economic gains must come at the expense of others. However, in today’s era of deeply rooted globalization, this mind-set is entirely out of step. The global supply chain has intricately intertwined the economies of all countries. Any attempt to manipulate tariff measures will ultimately backfire. No one stands to win in this tariff war. The US, by disrupting the stability of the global supply chain, is bound to pay a hefty price in terms of its own economy and employment.
For instance, the Peterson Institute for International Economics estimated that while the 2018 steel and aluminum tariffs protected a certain number of steel jobs in the US, they also led to a loss of much more jobs in downstream industries, resulting in a net negative employment effect.
Moreover, rather than protecting its domestic industries, the US tariff policy has instead triggered retaliatory measures on a global scale, making the global supply chain even more volatile. The primary reason for the widespread countermeasures is the severe damage inflicted on the economic interests of other countries.
When the US unilaterally imposes tariffs, it overturns this balance of fair trade. Various economies find their access to the US market restricted. Their legitimate efforts to develop through international trade are undermined. To uphold the fairness of the global trading system and safeguard their right to develop, these countries have no choice but to retaliate.
Overall, the US-initiated tariff war will ultimately prove that in an increasingly globalized world, the US cannot fuel its own development by forcing others to sacrifice theirs. True prosperity comes from openness and cooperation, and from a mutually beneficial international trade system.
GT
