Since the start of his Presidential election campaign in 2015, the world knew that Donald Trump would engage in trade wars. He connected with middle America by suggesting he would bring manufacturing and production back to states such as Ohio and Pennsylvania. Trump also told the nationalistic population that America would return to being the greatest superpower.
Many believed this would be through the protectionist policies that some of his counsel favored. Indeed, Trump ignited a tariff tit-for-tat with China, and since the UK’s decision to exit the European Union, has claimed they would be “first on the list” for trade deals with the US. Given how favorable Trump was towards the Brexit process, it comes as no surprise that his sights now look to be lingering over the EU. Is Trump going to start a trade war with one of the most powerful trading blocs in the world?
Why Could There Be a US/EU Trade War?
France was overruled by the EU on Monday 15 April – a move that seems to be commonplace – as talks between Brussels and Washington will be opened up. The EU is obviously concerned that Trump may enact some tariffs on their products and, as a result, they would be forced to do the same. A trade war between the USD and EUR would most likely result in a stagnation of the global economy. Trump’s concerns have been over aviation industry subsidies that he feels the EU are unfairly giving out – and not to him. Indeed, as the Daily FX trade wars history shows, small disagreements such as this have amplified into full-blown battles.
How Can We Monitor the Progress of the Trade War?
Monitoring how a trade war is affecting a country can be difficult, especially as pinched pockets are often felt by the silent masses. However, the Dow Jones chart can be a good way to see how events are impacting the value of a company. As shown by this interactive Dow Jones live chart, economists can analyze how certain decisions made by governments can affect certain industries and can use prior models of the DJIA chart (Dow Jones Industrial Average) to see how these have panned out previously. By monitoring how a growing potential trade war is affecting the value of companies, others can prepare for any possible tariffs and witness the direction the trade war seems to be taking.
As history shows, the world is constantly in a state of economic flux. It’s that flux that allows countries to rise up and provides a reason for businesses and countries to continue fighting. Should they settle down into a status quo, the economy would likely dry up and innovation would cease. However, a trade war between countries provides opportunities for economic innovation, with industries finding ways to get around the levies to develop new ways of doing things. So, it can be seen that trade wars are as capable of as much good as harm.
It’s difficult to tell how this situation will pan out. Trump’s antagonistic attitude may pay dividends for the US, but compromises need to be made on both sides if a trade war is to be avoided. With the EU wanting fewer tariffs on automotive exports and the US pushing for more agricultural trade, some give-and-take may be the answer to this conflict.