As the trade wars heat up

When I brought "trade disputes" forward in my column at the end of January, and referred to it as "looming” in March, I had set off on the idea that things had not escalated enough for the situation to be called a "war." It is a fact that since then we have dived deeper into the "trade war" concept which has been straining the world lately.

In this context, rational methods that were suggested at the World Trade Organization to solve trade disputes were not taken into consideration either. Indeed, the U.S. had no intention of doing this. Washington's "right to protectionism due to national security concerns," which it claimed during the first events, was proven to be a pretext with the action that followed. And the hopes of settling disputes through negotiations, if not completely, greatly failed.

So much so that China’s critical role in bringing North Korea and the United States together was not sufficient to prevent Washington from its intention to impose tariffs on Beijing. Under these circumstances, in which the Trump administration is still not willing to step back from its protectionist stance, these are the final days before the trade wars heat up. In the current tense situation, the multilateral trading system is undergoing an earthquake, where no rules exist; and if we direct our focus from the U.S., the starting point of events, toward the other two sides, the EU and China, their retaliatory responses to Trump's decisions will be the determining factor of the war.

The U.S. president is also face to face with severe retorts from Brussels, Berlin and Paris about new tariffs after he verbalized his concerns about European automobiles after aluminum and steel...

The EU front, which said something along the lines of: "If the rules are ignored, then we will also ignore them and retaliate," does not give signs of stepping back at all. It is only natural that the EU determination, which is still clearly seen on metal tariffs, will lead to motorcycle production being drawn back into Europe, which will only add fuel to the fire, and that similar developments will take place. If the trade wars escalate, then firms may opt for mutual investments instead of costly trade between the two sides of the Atlantic.

Whereas in the Pacific, both trade and technological investment debates are taking place. Although the U.S. taking a step back yesterday regarding its curb on investments that it has brought forth in the past few months in order for it to maintain its technological superiority against China offers some optimism in this regard, time is also running out for imports.

As of July 6, Chinese exports worth 34 billion dollars are expected to be slapped on with a 25 percent rate of customs tariffs, and it is known that Beijing will retaliate rapidly and more harshly. The U.S. is threatening a ten percent tariff on $200 billion Chinese goods if this situation comes to pass, bringing the battle to stage two. So it is probable that we may witness a boost in the series of retaliatory actions in the coming days.

Additionally, in an environment where no one steps back, it's not really possible to predict to how far things will go and what kind of damage it will cause. However, it is now crystal clear that the trade wars are one of the greatest risks that the global economy faces today... Yet, relevant actors are not limited to the U.S., EU and China.

Of course, at this point, it is necessary to add that critical factors such as market size, product dependency and alternative market opportunities will show relevant parties and the entire world where the trade wars will lead.