What will be the consequences of Trump's tax decisions? 'The start of a trade war can no longer be prevented'

Hazal Güven - 12punto.com.tr

US President-elect Donald Trump has officially announced the decision he frequently repeated during his campaign. In a statement on his social media platform Truth Social, Trump announced that a 25 percent tariff will be imposed on all products from Mexico and Canada, and an additional 10 percent tariff on products from China. Trump explained the justification for his decision as preventing the wave of migration and the export of drugs to the country.

Evaluating Trump's statements, which will have a bombshell effect on the economy and perhaps affect all countries, for 12punto, Centre for Economics and Foreign Policy Studies Director Sinan Ülgen recalled Trump's statements during the election campaign process. Ülgen stated, "These statements by Trump are actually not a huge surprise when considering the statements he made during the election period. Because during the election period, Trump also said that if he came to power, he would increase import tariffs on China to 60 percent and introduce an additional tax between 10-20 percent for all other trading partners."

‘VIOLATION OF OBLIGATIONS REGARDING INTERNATIONAL TRADE RULES’

Ülgen continued his remarks as follows:

“This statement is essentially a violation of America's obligations regarding international trade rules. Because countries do not have the legal right or means to increase customs duties unilaterally like this. They can only do this in the event of import pressure and on a product-by-product basis. International trade law allows for this. Here, Trump said he would go ahead and apply these decisions to total imports. This already contradicts America's obligations to the World Trade Organization.

When Trump said during the election period that he would implement this, he essentially voiced it to protect production in America and therefore as a protectionist measure. However, the difference in yesterday's announcement is that he has now announced he will do this directly for a political goal. And the political goal here is that he will use this sanction weapon as a pressure element to stop both the drug traffic and illegal power coming from Canada and Mexico.”

‘THE START OF A TRADE WAR CAN NO LONGER BE PREVENTED’

Stating, “The start of a trade war can no longer be prevented” regarding Trump's announcements, Sinan Ülgen said the following:

“The fact that the greatest Western economic power, which has been the founder of places like the Bretton Woods system created after World War II, and which has contributed to and been a defender of the advancement of this kind of multilateral, rule-based international system, is departing from these rules to this extent will have very deep consequences. First of all, the start of a trade war can no longer be prevented. That is, of course, if Trump does not change these policies when he comes to power. Because against these measures he will take against China, China will this time have to direct its exports that cannot go to America to other markets. This includes Turkey. Then places like Europe, like the EU, will this time apply additional protectionism against China. There will also be a reaction against America's measures that are contrary to these WTO rules, and we will find ourselves in such a trade war. The difference from the trade wars to date is that such a period is much more comprehensive. Because when you look at the trade wars to date, we could perhaps talk about a trade war arising from a dispute in certain specific sectors. Its scope was more limited. Here, there are no limits. We will be talking about a large-scale trade war that encompasses all economies. This is also a huge negative for the world economy. Because it will have inflationary results, create certain fractures in supply chains, and pose a major risk to the multilateral, rule-based international trade system. Unfortunately, this is the door that Trump has opened.”

News Source: 12punto