Threat of Starting of a new trade war in the world due to changes of trade policy by Donald Trump : By Prof. (Dr.) Tabrez Ahmad

The newly elected presidnet of USA Mr. Donald Trum after taking over the office on 20th January has signed 200 executive orders. Few of them are very crucial and have the potential of Starting of a new trade war in the world due to changes bringing out by Mr. Trump. 1. Key Tariff Actions by the Trump Administration Immediate Tariffs on Top Trade Partners: 25% tariffs on nearly all imports from Canada and Mexico (excluding energy resources, which face 10%) and 10% tariffs on Chinese goods, effective February 4, 2025. These measures were enacted using the International Emergency Economic Powers Act (IEEPA), bypassing lengthy agency reviews . Elimination of de minimis exemptions (for imports under $800) for goods from these countries, disrupting cross-border e-commerce and increasing costs for platforms like Temu and Shein. Expansion of steel and aluminum tariffs to 25% (from 10% for aluminum) and cancellation of previous exemptions, effective March 12, 2025. Reciprocal Tariff Framework: A new policy aims to impose tariffs on countries that levy tariffs on U.S. goods, maintain VAT systems, or implement "nonmonetary trade barriers." The Department of Commerce is assessing tariff levels per country, with results expected by April 1 . 2. Economic Impacts On the U.S. Economy: Consumer Costs: Tariffs could raise prices for automobiles (up to $3,000 per vehicle), gasoline (50 cents per gallon in the Midwest), and fresh produce (60% of U.S. vegetable imports come from Mexico) . Job Losses: The Tax Foundation estimates 269,000 fewer jobs due to Canada/Mexico tariffs and 73,000 from China tariffs long-term . GDP Reduction: Proposed tariffs could reduce U.S. GDP by 0.3% (Canada/Mexico) and 0.1% (China) before retaliation. Global Repercussions: Canada and Mexico: Both economies, where trade accounts for ~70% of GDP, face severe risks. Mexico’s GDP could drop 16%, while Canada’s energy sector (80% of oil exports to the U.S.) would suffer. China: Retaliated with 15% tariffs on U.S. coal/LNG and 10% on crude oil and vehicles, though its economy is less trade-dependent (37% of GDP) 1014. China also imposed export controls on rare earth metals (e.g., tungsten), targeting tech supply chains. 3. Retaliation and Escalation Canada and Mexico: Announced retaliatory tariffs on $100B+ of U.S. exports, including agricultural and automotive goods, risking supply chain disruptions in industries like semiconductors. EU and Others: The EU may retaliate against U.S. tech services if Trump follows through on threatened tariffs. India reduced motorcycle import duties preemptively to avoid tensions. 4. Broader Trade Policy Shifts "America First" Agenda: Trump’s policies aim to reduce trade deficits, boost domestic manufacturing, and decouple from China. This includes proposals for a 60% tariff on Chinese goods and bans on key imports like electronics and pharmaceuticals 15. WTO Challenges: China filed a WTO case against U.S. tariffs, though the dispute mechanism remains paralyzed, highlighting systemic trade governance issues. 5. Long-Term Risks and Uncertainties Inflation and Federal Reserve Challenges: Higher import costs complicate inflation control efforts, with tariffs acting as a regressive tax on lower-income households. Supply Chain Realignments: Companies may shift to "China Plus One" strategies or reshore production, but such transitions are costly and slow . Global Trade Fragmentation: The move away from multilateralism risks dividing trade into blocs, undermining decades of globalization. Conclusion: Donald Trump’s fast changes in tariff measures mark a pivotal shift in global trade dynamics, prioritizing protectionism over cooperation. While intended to revive U.S. manufacturing and address trade imbalances, the policies risk stagflation, job losses, and prolonged geopolitical friction. The coming months will be a litmus test whether these ploicy changes lead to negotiated concessions or a full-fledged trade war with escalating global impacts. Refrences: 1. https://www.freightos.com/trump-2025-tariffs-impact-on-trade-and-commerce/ 2. https://natlawreview.com/article/br-international-trade-report-february-2025 3. https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/ 4. https://thediplomat.com/2025/02/the-next-phase-of-the-china-us-trade-war-has-begun/ 5. https://www.bbc.com/news/articles/clyzp7j84yro 6. https://www.cfr.org/article/what-trumps-trade-war-would-mean-nine-charts 7. https://www.oanda.com/us-en/trade-tap-blog/analysis/fundamental/tariffs-and-their-impact-during-last-two-us-presidencies/ 8. https://www.nytimes.com/2023/12/26/us/politics/trump-2025-trade-china.html