President Trump has touted the unilateral trade tariffs he imposed recently as a way for America to finally get a fair deal – but the World Bank warns in a new report that he may be paving the bumpy road to another global economic recession as bad or even worse than the crisis that shook America a decade ago.
“A worldwide escalation of tariffs up to the limits permitted under existing international trade rules,” adds the report, “could lead to cumulative trade losses equivalent to those experienced during the global financial crisis in 2008-09.”
In recent weeks Trump has acted without the approval of Congress to levy stiff new tariffs on steel, aluminum, and other products, on China and otherwise friendly international allies like the countries of the European Union, Canada, and Mexico causing them to retaliate with their own new tariffs on the import of American goods, products, and agricultural output.
Trump is also threatening to go back on the 25-year-old NAFTA pact which has led to a huge increase in commerce across North America, claiming he may be able to do better if he negotiates one-on-one with Canada and Mexico.
“It’s really hard to believe that he is going to abolish NAFTA, that the American business community with its integrated supply chains (and their friends on the R side in Congress, will meekly accept this, or that Mexico and Canada would agree to such an obvious divide-and-conquer tactic,” David Wessel of the Brookings Institute told Axios.
This is being called a trade war and like most wars, there will be a lot of losses, victims and unpredictable outcomes that will, in the end, make the cure worse than the disease.
The World Bank warns that these tariff increases are likely to result in “severe consequences” for global trade that could be worse than what happened n 2008.
“A broad-based increase in tariffs worldwide would have major adverse consequences for global trade and activity,” says the report.
“An escalation of tariffs up to legally-allowed bound rates could translate into a decline in global trade flows amounting to 9 percent, similar to the drop seen during the global financial crisis of 2008-09.”
Trump’s use of executive orders to impose the tariffs without consulting other major players in the U.S. government and the business community may be what puts the brakes on some of his rogue economic policies.
This time it’s not just Democrats and Independents who hate what the president is doing. It is also some leading Republicans.
In fact, a group of Republican Senators has attached an amendment to the must-pass defense authorization bill that would limit Trump’s ability to use “national security” as his excuse for imposing tariffs.
Today, Trump called Republican Senator Bob Corker (R-TN) and asked him to withdraw his amendment but Corker told an angry Trump that he plans to proceed, according to CNN.
“He’s not pleased with the effort,” Corker, who is retiring at the end of his term.