Macroeconomic implications of increasing protectionism

The global trading landscape has changed rapidly in recent months. Announcements of tariffs by the US Administration and retaliation by its trading partners have raised concerns about a possible 'trade war' and, potentially, a broader reversal of globalisation. On 1 March the US Administration announced tariffs of 25% on imports of steel and 10% on imports of aluminium from a wide range of countries. The first wave of tariffs relating to technology transfers on Chinese imports took effect on 6 July, followed by the announcement of retaliation in kind by the Chinese authorities. In response to the Chinese retaliation, the US Administration threatened to impose additional tariffs. In parallel, the EU and Canada implemented retaliatory measures against the US tariffs on steel and aluminium. Finally, the US Administration initiated a new investigation of imports of cars, trucks and auto parts (to determine their effects on national security) which could result in additional tariffs. Recently, however, there have also been some signs of a reduction in trade tensions resulting from a meeting between US and EU officials as well as the new NAFTA arrangements between the United States and Mexico. JEL Classification: F13, F17, C54