July 12, 2018 ( Lagos ): President Trump delivered on one of his campaign promises, as the US battled with a sizeable trade deficit of $568.4 billion in FY 17. Precisely, US imposed tariffs on imports of commodities from major trade partners – China17, EU, Canada, and Mexico18. With the value of the trade deficit with China (59% of total trade deficit) far exceeding other trade partners, the focus has been on narrowing the gap. 

Going by available data, the US trade position has largely been in favor of major trade partners, with the size getting bigger as consumption pickups in the US. Precisely, in 2017, total imports to US from China was valued at $523 billion, relative to exports to China valued at $188 billion, thus creating balance in favor of China to the tune of $335 billion. 

Accordingly, the US imposed 25% and 10% tariffs on steel and aluminum imports from China with a total value estimated at $34 billion which commenced since Friday 6th July 2018. In a move further escalating the trade war, the Chinese government retaliated with a tariff of commensurate worth on imports from US. 

While a higher tariff would jolt the price level in the US, it is likely to have far more telling impact on export demand for Chinese goods as demand shift to regions with far more cheaper substitutes. However, when the tariff on EU, Mexico and Canada takes effect, this would put the US at the losing end.

Reporting for EasyKobo on Thursday, 12 July 2018 in Lagos, Nigeria

Source: ARM Securities Limited

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