If Donald Trump returns to the White House and implements his promised trade war, it could significantly damage the US and global economies. His plan includes hefty tariffs on all imports, especially from China, potentially shattering the post-World War II multilateral trade regime.
If Donald Trump regains the White House and follows through on his threats to wage a new trade war against friends and foes alike, it will upend the multilateral trade regime that has been in place since the aftermath of World War II., which Trump threatened to withdraw from when he was last in office, and would cause a large-scale realignment of global trade relationships and economic flows.
Within the “column one” category, the best terms of access to its market that a country gives to any other country is automatically extended. That has been a cornerstone of the multilateral trading system. In column two, anything goes.China was originally in column two but between 1980 and 2001, when it joined the WTO, the more punitive tariffs were waived, annually. As a member of the WTO, it received the most favoured nation status and its exports exploded.
Another study by the Peterson Institute for International Economics last month concluded that revocation of China’s PNTR status would cause a short-term decline in America’s GDP that would never be fully recovered.Inflation would rise by 20 to 40 basis points relative to the status quo , stock prices would fall and the US trade deficit would rise.
Where his last trade war with China, and to a lesser extent some of America’s traditional allies, had modestly negative impacts on the US and Chinese economies, the new trade strategy he has promised to introduce would do far more damage to the United States and its trade partners.
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