Donald Trump announced the introduction of duties on almost all imports. What will be the consequences for the global economy? And most importantly, for Ukraine?
We need to understand the history of why Trump declared this American Liberation Day. In addition to his election promises, Trump came out and said that they have a bad trade balance. There is a trillion dollar gap in exports and imports of goods. Accordingly, ‘we want to settle it’. He forgot that they have a surplus in exports of services and capital, but that's the way it is.
The only criterion for selecting the countries for which he imposed 10%, 20%, 30%, 40%, and 50% duties was their planned trade balance with the United States. There are about 60 such countries on the list. Plus, he imposed a minimum 10% duty on all of them.
There is good news and bad news for us. The good news is that Ukraine fell under the lower limit, i.e. only 10% duty. The bad news is that we still hit this limit. Because the US officially exports 5.5 times more to Ukraine than Ukraine exports to the US. Our exports to the US do not even reach a billion dollars, which is no more than 2% of our total exports.
Most of our exports, 60-70%, were of steel products. But since March, the US has already imposed a 25% tariff on pipes, steel and aluminium. Our agricultural and food products account for another third of exports. However, we expected a tariff to be introduced for these products in April.
Therefore, the introduction of 10% is not a disaster for Ukraine. Especially when compared to other countries. Our 10% tariff is not 54%, like China's.
But there is another problem. This whole tariff war story could shake up all markets so much that the global economy will face a general recession. Some economists are already making such predictions. By the way, I am not one of them. However, there are forecasts. And in our situation, when the war is ongoing, we do not need a recession.
By the way, Trump did not impose even a 10% duty on the aggressor, Russia.
Neither did he impose a 10% duty on Belarus or North Korea. But here the White House points out that they are already subject to a bunch of embargoes, sanctions and bans, so why impose additional duties.
Although this is actually different from Tump's statements this week. When he threatened tougher sanctions against Russia for dragging out the negotiation process for a truce with Ukraine.
But this is not the first time that Donald Trump's statements differ from Trump's decisions. However, it is probably not worth saying that this is a betrayal.
From a purely psychological point of view, it was unpleasant to see a zero figure for Russia. But they have virtually no trade with the US anyway.
In the context of war, how will this global trade war affect Ukraine? Does it threaten to reduce the amount of assistance from our European partners?
There are several points here. Of course, we always look for the political context. But if we analyse all the tariffs, we will see that the US allies have suffered the most so far. In particular, India, which has good relations with America. Also Saudi Arabia.
And once again, I emphasise that the main criterion was purely the trade balance between the two countries. If it was negative for the US, these countries received tariffs. When Trump presented these tariffs, he showed a sign on the left that said what tariff was already in place in that country for goods from the US. However, there is a nuance. In fact, no one understands how and who calculated all this for Trump. No one knows exactly how these figures were derived. It's a secret. Even more secret than the recipe for Coca-Cola.
But going back to the context of the war, I don't think this trade war will have a global impact on our economy and on the provision of assistance to Ukraine. Our exports to the United States were important, but we earned up to a billion dollars a year there in the best of times.
However, globally, we are entering an intensification of trade wars. Because China will now respond to the United States. So will India and the European Union. The head of the European Commission, Ursula von der Leyen, has already said in a cultural European manner that the EU is preparing retaliatory measures. In general, this battle is accepted.
This confrontation between the EU and the United States, of course, cannot make us happy. Because now European countries will switch from the war in Ukraine, Israel, and even a potential war with Taiwan to the trade war that Trump announced yesterday. And no one has understood what the real reason for it was. The response will be accordingly. Although it is not a given that Trump, as usual, will not fight back.
But all of this will distract our allies from the Coalition of the Resolute to resolve the tariff issue. But there is nothing we can do about it. This is a rare case when we did not make a mistake.
The US stock market has already lost more than two trillion dollars amid Trump's statements. What will be the consequences?
A two trillion dollar drop in the stock market is less than 2%. There is an interesting point here. Trump began his speech at 4:10 a.m. Washington time. This time was not chosen by chance. The stock exchange closes at 4:00. And now we don't know how much they have lost. But the main risks are different.
There will be a certain collapse in America itself. Because they will not be able to quickly replace all products from China. Tariffs should be a scalpel in the hands of politicians, and Trump has taken out a chainsaw. It looks epic, beautiful, large-scale, but in terms of practical application, I'm afraid America itself will have more problems.
How will this affect the US dollar?
I don't think the dollar will change its position significantly. Of course, the exchange rate will fluctuate, including because the US Federal Reserve is now playing with the rate to somehow balance inflation. Because Trump has introduced a 10% tax on all inflation. And this is really a lot. So inflation will rise there because an additional tax on imports has been introduced.
But whether it is so critical that we in Ukraine will notice dollar fluctuations, no. For us, the dollar exchange rate depends on our macroeconomic indicators. Thank God, they are stable.
Could Trump's trade war bring China and the EU closer together to retaliate against the US?
China has many products that they would be happy to sell to the EU. At the very least, it's electric cars. The EU has not been very open to China entering its market. Just as China limited the EU's access.
Now Ursula von der Leyen has come out and made it clear that the EU is ready to expand trade relations with China and India.
I am convinced that India will come out with the same message: ‘We warned you that Trump would come. We love the European markets and are ready to trade with them and expand our representation.’
At this stage, China wins, the European Union wins. But whether America will win in the end is a question. Because bringing back jobs and building American factories sounds nice. But how can this be physically implemented? Try building a plant in two or three years.