Trump's decision could reshape the global economy: Prolonged trade war looms

In the context of escalating geopolitical tensions, the Trump administration has taken a significant action that has the potential to disrupt the established global trading system. The imposition of 145% tariffs on Chinese goods is not merely another round in the Washington-Beijing confrontation. This development signals a potential seismic economic shift with ramifications for nations worldwide. The announcement of these tariffs, justified by China's alleged disrespect for international markets, triggered immediate consequences. The Chinese Foreign Ministry declared its readiness to "fight to the end," while financial markets around the world tumbled. However, the full repercussions of this crisis are yet to be realized.
The President of Türkiye Recep Tayyip Erdogan warned that the trade war provoked by these customs duties will have global consequences. He compared the impending trade conflict to an approaching storm that would affect everyone, regardless of size or position.
It is evident that American consumers will be the primary demographic to experience the repercussions of this situation. Prices for electronics, clothing and household goods, for which China's share reaches 40-60 per cent, have the potential to double. This will inevitably have a detrimental effect on the purchasing power of the middle class and small businesses that depend on affordable Chinese goods. However, global production chains face even greater risks. European car manufacturers, reliant on Chinese components, are already anticipating the possibility of assembly line closures. Asian electronics exporters are predicting delays in deliveries. Even African and Latin American countries, which are distant from the conflict yet supply China with raw materials, will face a decline in demand. The European Union finds itself in a precarious position, facing difficult trade-offs between transatlantic solidarity with the US and economic self-interest. Germany, whose automotive industry derives 30% of its profits from the Chinese market, stands to lose billions. Meanwhile, French luxury manufacturers, for whom China is a primary sales market, are already preparing protest letters to Brussels. The EU's own challenging economic circumstances further complicate matters, as the ongoing trade war may intensify inflation and potentially derail economic recovery from the energy crisis.
For Asian economies, the consequences could be devastating. Taiwan, a vital part of the Greater China region with semiconductor factories contributing 60% of global chip production, plays a crucial role in global tech manufacturing and could be severely impacted. Taiwan's technological development is inextricably linked to mainland China's support. Similarly, South Korea, whose economy is closely tied to both the US and China, could lose up to 5% of GDP.
The parallels that can be drawn between the current situation and the trade relations between Georgia and Kazakhstan. However, these and other Asian countries have long been important links in the production and logistics chains of Chinese goods. The introduction of new tariffs could have a significant impact on the revenues of Central Asian and Caucasus countries, potentially depriving the region of a vital source of income. Analysts are considering potential scenarios. A swift resolution (with only a slim chance of occurring) could lead to a mild economic disturbance within 6-12 months if the involved parties reach an agreement. Alternatively, a protracted trade war with a duration of three years is predicted, which would result in a 1.5-2% drop in global GDP, a recession in Europe and stagnation in Asia. However, a full-scale economic rupture is also possible, with a trade blockade, a technological cold war and a real risk of military conflict in the Asia-Pacific region.
President Trump's decision should not be viewed as just another tariff adjustment. It marks the beginning of a new era in the global economy characterized by disunity, protectionism, and trade wars. The ramifications will likely persist for years or even decades. As one expert, speaking on condition of anonymity, put it: "We are on the brink of the most dangerous economic crisis since the Second World War. The most alarming aspect is the uncertainty surrounding the point of no return. In the coming months, we'll learn whether world leaders can halt this dangerous spiral, or if humanity must endure the most significant economic shock in modern history."
Elbrus Mamedov

SR-CENTER.INFO