Now sighs are emerging that President Trump’s trade war are starting to hit economic growth

Now sighs are emerging that President Trump’s trade war are starting to hit economic growth, not just in US but all around the world, new data shows us that US trade deficit in July is widening at its fastest rate since 2015 as monthly deficits China and the European Union both hit new records. In the year so far, the US’s overall goods and services deficits is up by $22 billion or 7% compared to the same period last year. The numbers coincide with Trump’s moves escalates his battles with China and efforts to badger Canada into sighing on to a New North American Free Trade Agreement (NAFTA), highlighting what economists have argued is the incongruity of his trade policies. Even as he launches his battles in the name of reducing the US’s imbalances, he has been causing the overall deficit to grow by increasing public spending and encouraging domestic investments. Also apparent in the trade data are some of the distortions that Trump’s policies have been fuelling and how they may be helping mask the long-term impact of his trade wars. While soybean farmers are widely seen as one of the likely Victims of the trade war China, for example a surge in exports of Soybeans to get ahead of new tariffs helped boost US GDP growth in the second quarter. In the first seven months of this year, the value of US soybean exports actually increased by more than 40% or $5.7 billion compared to the same period last year. Those distortions are likely to be temporary and this is why many economists believe US GDP growth may have peaked at 4.2% in the second quarter, with trade likely to be a drag on growth in the months to come. The effects of trade are unlikely to be restricted to only US and China, due to this other country will also find a change in the dynamics of their economy. Like the basic principles of economics that is supply and demand will once again come to a play. The shortage of supply of goods, either finished material or raw, will increase the final consumption price for the consumers. Moreover, the burden of increased tax from the duties will also borne by the final user. India also gets affected by the trade war for example the Rupee value has dropped to an all-time low, when in some occasions it was hovering around the mid 68s against the US dollar. This coincided with Trump’s threat of imposing a fresh round of tariffs on exports worth $200 billion. This trend can weaken the US dollar, which automatically creates a negative impact on the trade deficit of India, causing a chain reaction of sorts. The stock market also saw a significant drop in this period, as of now the Sensex is trading at about 37.5 which is below the average. As the US imposed duties on steel and aluminium, India now has to pay approx. $241 million worth of tax to the US. India on the other hand as a counter-measure has proposed imposing duties on different types of goods. This will ensure that the US has to pay about $238 million as duties to India. This will surely make life difficult for the end consumers as everything that falls under the tariffs scanner is expected to become more expensive.

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