Trump ignites global trade war, major economies vow

In a bold move, President Donald Trump has imposed steep tariffs on imports from China, raising rates to 34%. This decision also affects emerging manufacturing nations like Vietnam and Cambodia, while European Union imports face a 20% tariff. As markets react negatively, both the EU and China have pledged to retaliate against these levies, raising concerns about a potential trade war.

Global Reactions and Economic Implications

The EU has expressed serious concerns over the new tariffs, with Commission chief Ursula von der Leyen describing them as a “major blow” to the world economy. She warned that if negotiations fail, the EU is prepared to implement countermeasures. “The global economy will massively suffer, uncertainty will spiral, and trigger the rise of further protectionism,” von der Leyen stated, highlighting the potential for widespread economic disruption.

China’s commerce ministry has also reacted strongly, urging the U.S. to “immediately cancel” the tariffs. They warned that these measures threaten global economic development and could ultimately harm U.S. interests and international supply chains. The ministry emphasized that “there is no winner in a trade war, and there is no way out for protectionism,” calling for dialogue instead of escalating tensions.

Neil Shearing, chief economist at Capital Economics, noted that the tariffs are more severe than expected, pushing the average U.S. tariff rate to nearly 25%, levels not seen since the 1930s. He cautioned that if these tariffs remain in place, U.S. inflation could exceed 4%. The impact is particularly pronounced on China, where the tariff rate has now surpassed 60%.

India to impose up to 30 per cent tariffs on some steel imports from China, Vietnam

Interestingly, the newly announced tariffs do not apply to crude oil, natural gas, or refined products. However, concerns linger about the broader implications for GDP growth. A slowdown in economic activity could signal weakening demand for shipping, as noted in a shipping market update from Skandinaviska Enskilda Banken (SEB).

Historical Context and Future Outlook

This latest round of tariffs echoes the first trade war initiated by Trump seven years ago, during which China targeted U.S. farmers by reducing imports of American grain. China has since adapted by increasing imports from Brazil, minimizing the impact on shipping volumes. Data from Clarksons Platou Securities indicates that dry bulk commodities, particularly grain and steel, were the most affected during the previous trade conflict, followed by liquefied natural gas (LNG) and liquefied petroleum gas (LPG).

Broker Braemar has suggested that retaliatory tariffs from China could have a more significant effect on cargo volumes than the U.S. tariffs announced on April 2. As the situation unfolds, the global economy remains on edge, with businesses and markets closely monitoring the developments in this escalating trade dispute.