Choppy waters ahead for global trade, warns Economist Intelligence Unit

The analysis by the Economist Intelligence Unit predicts an increase in protectionism, falling short of a full-scale trade war.

On March 8th the US administration led by Donald Trump imposed broad tariffs on imports of steel and aluminium. While a number of countries were temporarily exempted from these tariffs, China and Japan were not. The dispute escalated on March 22nd following the conclusion of a US Trade Representative investigation into China's intellectual property and technology transfer practices. The Trump administration's proposal would see tariffs of an additional 25% on US$50bn of imports from China, covering goods that are related to the Made in China 2025 initiative such as machinery and electrical equipment. China responded quickly but proportionately, with a list of tariffs of equivalent value on imports from the US including soybeans, vehicles and aircraft.

One of the factors restraining both sides in the dispute, according to the report, is the fact that a growing proportion of goods is of an 'intermediate' nature - that is to say made in more than one country. Measures taken against Chinese goods could, therefore, adversely affect American business and vice-versa. Furthermore, pressure from businesses in both countries and political considerations in the US should dampen hostilities.

Nonetheless, the report envisages a slow-down in global trade growth and the possibility of a mild recession in the US in 2020. The report can be downloaded free here.