"Krone" commentary
Trump launches trade wars
The US president has imposed the first punitive tariffs: 25 percent against Canada and Mexico. Ten to 20 percent have been announced against the EU and 60 percent against China. Canada does not want to put up with this and wants to hit back. The feared trade wars are on the horizon.
"I love tariffs," Trump says incessantly, as if it were like asking for a drug. But that's exactly what tariffs are not supposed to be. But they are a risky medicine: in small doses they can heal, in large doses they can harm.
Examples:
- After the US stock market crash in 1929, countries tried to protect themselves with tariffs (and a race to devalue money). This led to the global economic crisis.
- After independence, India sealed itself off from the global economy by imposing tariffs. The result was not a strengthening of the Indian economy, but degeneration. China opened up and pulled away.
Austria had a strict customs regime in the post-war years, but always with the aim of gradually abolishing it as soon as possible. Only by measuring itself against the competition (from abroad) can an economy strengthen its innovative power. That is also the purpose of free trade.
Trump runs the risk of losing the measure to which tariffs are harmful, especially if it comes to a tariff war. Prices can rise, bring back inflation, slow down the economy.
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