Global trade wars: How U.S. tariffs on China and Canada could reshape the economy – INTERVIEW
In today’s world, the economy has become a battleground for global power struggles. Trade wars, sanctions, and tariffs are no longer isolated disputes but have far-reaching consequences that shape the global market. How are the world’s largest economies responding to these challenges? What impact will protectionist policies have on long-term economic stability? And can such measures truly secure a lasting advantage for those who implement them?
To explore these pressing issues, News.Az spoke with Dr. Rufat Guliyev, Doctor of Economic Sciences, Professor, and Deputy of 4 convocations of the Parliament of the Republic of Azerbaijan. In this interview, he shares his insights on the impact of U.S. tariffs on China, the potential consequences of escalating trade wars, and the broader implications of rising inflation in Europe.
— China recently announced the introduction of 10% tariffs on U.S. oil, large vehicles, pickups, and agricultural machinery, while coal and LNG imports will be subject to a 15% tariff. What impact will these measures have on China’s economy?
- First, it's important to acknowledge that trade wars are nothing new. Historically, economic rivalries have always existed, though their centers have shifted over time. Previously, we saw competition between the U.S., Europe, and Japan. Today, China has emerged as a major economic force, directly challenging U.S. global economic dominance.
China’s response to U.S. tariffs is a clear tit-for-tat measure. While such policies will inevitably have economic consequences, large corporations and financial conglomerates typically find ways to mitigate their losses. The real burden often falls on ordinary citizens, as higher tariffs drive up prices and contribute to inflation.
A striking example of the broader geopolitical impact of U.S.-China tensions is Panama's recent decision to halt cooperation with China on the Belt and Road Initiative. If this trend continues, Chinese companies may face significant hurdles in developing critical infrastructure, such as ports along Panama’s coast. While the U.S. might see short-term gains, it remains uncertain whether Washington can sustain long-term economic superiority over Beijing. Negotiating trade deals with China is vastly different from dealing with smaller economies like Panama or even Canada. China remains a global economic powerhouse, with a rapidly growing economy that continues to expand as long as its GDP growth rate stays above 4-5%.
At the same time, escalating tariffs will inevitably lead to rising costs, higher consumer prices, and greater financial strain on businesses. Given China's economic resilience, it is unlikely to be significantly weakened by these measures, but the global market will certainly feel the repercussions.
— On February 1, U.S. President Donald Trump signed a decree imposing tariffs of 25% on Mexican goods and 10-25% on Canadian imports, particularly in the energy sector. What long-term economic consequences could arise for the U.S.? Could this lead to instability in global energy markets?
- The situation with Mexico has largely been settled—at least for now. The U.S. exerted pressure, and Mexico had little choice but to comply. However, the dynamic with Canada is more complex. Politically, Canada is unlikely to accept a position akin to becoming the 51st U.S. state.
Retaliatory measures from Canada and other trade partners could lead to significant disruptions in supply chains, affecting industries reliant on Canadian raw materials and exports. Trump's strategy is clear: he wants to demonstrate that the U.S. can dictate economic terms just as it does in global politics.
However, trade wars have consequences. We are already witnessing a slowdown in economic growth in both the U.S. and China. The trade conflict with the European Union is another emerging front, with Washington pointing to a $350 billion trade deficit as justification for imposing tariffs. While some concessions may be reached through negotiations, the broader pattern remains clear—protectionist policies are being deployed as economic weapons.
The erosion of the middle class is another concerning trend. In the past few decades, and especially in recent years, we’ve seen a widening wealth gap. While a small fraction of the middle class has transitioned into the upper economic strata, the majority is experiencing downward mobility, leading to increasing social and economic strain. The middle class is the backbone of economic stability in the U.S., Europe, and Japan. China is only beginning to grapple with these issues, but the trend is emerging there as well.
— What is the current level of industrial inflation in the EU, and how does it affect broader economic stability?
- Industrial inflation in Europe is alarmingly high, exceeding 10-12% in many sectors. This has profound implications for the cost of producing machinery, tools, and industrial goods, which inevitably filters down to the consumer market, driving up prices for everyday goods.
Another key factor exacerbating inflation is rising military expenditures. Over the past few decades—and particularly in the last three to four years—we’ve seen significant increases in defense budgets. While such spending may be politically necessary, it contributes to economic strain, fueling inflationary pressures.
Inflation in the Western world was traditionally kept at around 1.5% annually. Today, it rarely falls below 3%, often reaching higher levels. When considering cumulative inflation over the past three years, prices in Europe have surged by 45-50% for many goods and services.
Energy prices are a critical factor in this inflationary spiral. The rise in energy costs triggers a chain reaction, increasing the prices of consumer goods and services. Industrial inflation is advancing at an even faster pace than consumer inflation, directly impacting developed economies that depend on advanced manufacturing and high-tech industries.
The world economy is at a crossroads, shaped by shifting trade alliances, protectionist policies, and inflationary pressures. The U.S.-China trade war, escalating tariffs, and the erosion of the middle class in major economies are all contributing to an uncertain future.
While global players navigate these economic battles, the key question remains: how long can such policies be sustained before they trigger deeper instability? Whether through negotiation or prolonged economic competition, the outcome will define the trajectory of global markets for years to come.
Similar news
