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How Countries Should Respond to Donald Trump’s Trade War

Posted March 05, 2018

Under Economic Issues, International Trade Issues

(Warwick McKibbin – Financial Review)

President Donald Trump has promised to raise tariffs again. This is not an isolated threat, but a continuation of a commitment he made during the election campaign to solve the US trade deficit.

Before considering how countries might respond to these volleys of protectionism on solar panels, aluminum, steel and other products, it is instructive to go through the basic economics of what determines the trade position of a country.

The current account of a country is, by definition, the difference between a country’s national savings and national investment.

A country that invests more than it saves has relatively high interest rates and rates of return which drag financial capital from overseas. Click here to read more.

Related: WTO Chief Makes Rare Warning of Trade War Over U.S. Tariff Plan (Reuters)