“Markets have remained remarkably steady. However, as the full magnitude of the conflict becomes clearer, and the implications for the global trading system are digested, such stability cannot be taken for granted.”
August 2, 2018 —The long trade peace that took hold with the signing of the GATT in 1947 is over, according to an analysis published by the C.D. Howe Institute. In “The March into Trade Wars: US Policy Aims and the Implications for Reconciliation” author Dan Ciuriak contends the world is embroiled in a trade war of global dimensions, with few prospects for resolution.
“The outbreak of trade wars, with no obvious off-ramp back to trade peace, is worrisome,” says Ciuriak. “Markets have remained remarkably steady. However, as the full magnitude of the conflict becomes clearer, and the implications for the global trading system are digested, such stability cannot be taken for granted.”
To date, the scale of conflict is still minor. Much more, however, is in the works. This includes:
- $16 billion worth of US tariffs on China, to be matched by tit-for-tat Chinese tariffs on US goods.
- The Chinese response could be met by further US retaliation of 10 percent tariffs on over $500 billion worth of US imports from China.
- The possibility of US automotive sector tariffs, at levels possibly as high as 25 percent and on as much as $350 billion worth of worldwide imports, which would likely be matched by knock-on tariffs by US trading partners.
Moreover, the regional outlook for Canada is not good, says Ciuriak. While there are no significant problems in NAFTA to fix, and powerful grounds for not fixing what is not broken, the great drivers of US support for continentalism have receded since NAFTA’s implementation. The auto sector, for instance, has shifted production to Mexico, while the fracking revolution has fundamentally altered US need for energy imports. Both factors weaken the “big picture” case for NAFTA in the United States at the national level.
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The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.
For more information please contact: Dan Ciuriak, Fellow-in-Residence with the C.D. Howe Institute; or Laura Bouchard, Communications Coordinator, C.D. Howe Institute, 416-865-9935 or lbouchard@cdhowe.org