Tariff uncertainties - a hot topic gets more heated

There is so much noise around the tariff announcements that have been building since March.  A useful timeline of these is provided on the BBC News website.  

The latest development at the time of writing is the US pledge to provide aid to farmers hit by the ‘trade war’.  So what is going on?

This is a complex issue, but some of the key ingredients are set out below:

  1. The US President is keen to address trade imbalances with China (and others). The nature of the imbalances is neatly summarised in a Bloomberg article: 'The US-China trade relationship – a dispute in five charts’.  This can be searched on Bloomberg.com.
  2. President Trump is taking a strong negotiating stance to encourage unilateral concessions. In the absence of which he is willing to impose large tariffs.  This has been clearly evidenced in the announcements cited earlier.  Indeed tension reduced in May when China announced proposals to reduce the imbalances.
  3. As highlighted in a March RWA Insight blog tariff impositions predictably encourage reciprocal responses – targeted at politically sensitive constituencies in the US. 
  4. The latest announcement is designed to cushion the resultant blow.

And, of course, there is further complexity! The approach taken by the US has in part been disruptive to the World Trade Organisation (WTO) consensus designed to manage such trade disputes.  The reason?  The US President not only has concerns with trade imbalances and the practices of China.  There is also frustration with the restriction that WTO rules place on the US’s ability to act. 

So, in summary, this does feel like a game of multi-dimensional chess to wring concessions out of trading partners.  But one further goal may also be to drive changes to the WTO regime that has been in place since shortly after the Second World War.

Naturally, developments at these political levels readily impact on the customs procedures outlined in the Trade & Export Online course material. We will continue to update the learning material to reflect contemporary issues.

About the author

David Millett is a coach and trainer who works regularly for RWA. He has a long experience in trade issues with a background in banking, where he was Head Of Trade Product Management for the Royal Bank of Scotland, before becoming Head of Business Development for UK Export Finance’s short-term business. David is a Fellow of the Institute of Export and former Council Member for the International Chamber of Commerce UK and the British Exporters Association.

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