The United States, which has one of the world's largest economy and is one of the most important actors of global trade, mobilized both its own trade partners and global economic dynamics with the decision to introduce additional 25 percent and 10 percent customs duty on imports of steel and aluminum respectively as of March.
China, which has the largest market share in U.S. imports, did not remain silence in the face of this decision and retaliated with a move to apply tariffs of 15 to 25 percent on 128 different U.S. products. This move sparked the “trade wars” rhetoric, and took the global economy agenda by storm.
As a matter of fact, these mutual retaliatory actions by both countries were assumed to have come to an end after negotiations in May. However, it can be derived from the announcement made by the U.S. at the beginning of last week that it will impose an additional tax on 100,000 items worth $50 billion imported from China that the U.S. is not willing for a settlement in this trade war.
From free trade to protectionism
The lion’s share that the U.S. has in the global trade market is an indication of the extent to which the decisions it makes and the policies it pursues have an impact on the global economy.
Today, the U.S. is using the mentality of free trade, which is the most important instrument for increasing opportunities for cooperation and creating common interests, as a weapon and trying to change global trade.
Every policy that the U.S. has pursued from March to the move not to sign the G7 joint statement in support of global trade has been an indication that Washington is trying to steer the course of global trade with its protectionist stance.
Thus it is quite natural that China, the world's second largest economy, does not remain silent in the face of the U.S. moves.
Where will the mutual retaliatory actions adopted by the U.S. and China lead to? Who will decide the course of trade wars?
The future course of trade wars
It seems like the retaliatory moves between the U.S. and China and the fact that the U.S. is not keen on negotiations or a settlement that the U.S. may take a tougher line in the upcoming period.
Of course it is not just about China. It is also necessary to touch upon the impact on Europe. Such tension between the EU and the U.S., the leading allies of global trade, begs the question of whether their ongoing alliance of many years will collapse.
On the other hand, the decision of the U.S. to also impose tariffs on Canada and Mexico has resulted in the winds of the trade wars to blow around these regions as well and has caused distinct reactions.
Frankly speaking, we can say that the course of the upcoming period will be determined by the measures adopted by China and the European Union. By this means, we will see whether the current tension will turn into a war of trade protectionism.
How will trade wars impact Turkey?
It is clear that the impacts of this trade war sparked by the U.S. and China which could alter the global economic balances will not be limited to the two countries. As a matter of fact, the funding costs have already started to increase in developing countries due to the strict monetary policy adopted by FED and the rhetoric of trade wars.
Even though countries such as Turkey are not exposed to raised tariffs, the global reduction of willingness to take economic risks will affect fund flows and hence investments.
The impacts of the trade war between the U.S. and China on the relations between the U.S. and the EU can also throttle the export volumes of developing countries, constricting global growth.
It is possible for Turkey to turn this crisis into an opportunity by restudying its foreign trade strategy and taking steps to increase its share in global trade.