On March 1, US President Donald Trump announced the introduction of import tariffs on steel and aluminium at the rate of 25% and 10% respectively. In turn, the European Commission said that if protectionist measures were introduced, Europe would find a “proportionate” answer. In an interview with valdaiclub.com, Yaroslav Lissovolik, Programme Director at the Valdai Discussion Club, explains how this step is connected with the US domestic policy and whether it can be considered an act of a new “trade war” against Europe, Russia, and China.
“First of all, these measures should be seen as aimed at fulfilling electoral commitments. Previously, the steel sector was repeatedly chosen by the US administration as an object of protectionist measures as was the case, for example, under President Bush. This is largely due to the fact that US steelmaking is concentrated primarily in the so-called ‘swing states’, i.e. the ones playing a sufficiently serious role in determining the fate of electoral campaigns. Considering the circumstances, the restrictions, which are being applied now, are likely aimed at complying with electoral commitments.
“From an economic point of view, risks associated with the threat that Europe will respond to are compounded by risks of aggravation of economic tensions along the US-China axis. Tensions in trade relations between the US and China may be even more negative for the world economy and its growth that the US-Europe tension. Therefore, I think that economic considerations do not play a leading role here. Now we can say that the risk of protectionism and trade confrontation is one of the key risks for the world economic growth.”
Concerning the prospects of trade confrontation, the expert does not express much optimism, although he expressed hope that economic pragmatics will prevail over political rhetoric: “All of this can certainly go far enough, but I think that there is understanding on both sides of the Atlantic that protectionism involves serious costs and losses. Although a few days ago financial markets, seriously concerned about a possible trade war, declined, they are recovering now. Therefore, I think that now the markets, observers and experts have a certain hope that the flywheel of protectionism will be stopped”.