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Washington has said it would implement tariffs on $34 billion of Chinese imports on July 6, and Beijing has vowed to retaliate in kind on the same day.
Investors watching the trade tit-for-tat between the United States and China may well have reason to fear the havoc a full blown conflict between the world’s two biggest economies could wreak on the global economy. The World Trade Organisation said the global system of agreed trade rules was potentially at a large risk.
It said world economic growth was in jeopardy and pleaded for de-escalation. Both China and the EU responded with the threat of import tariffs on US cars and agricultural goods totalling hundreds of billions. Sputnik spoke to Economist Steve Keen about the escalating trade war.
Sputnik: How far could this trade war escalate?
Steve Keen: A hell of a long way, because we are making the mistake is trying to think of this in strategic terms, when we have someone in the mix who is a personality weirdo like Donald Trump.
He enjoys conflict and its part of the personality type he has, narcissistic personalities, they enjoy conflict, anything that makes them the centre of attention they prefer it and he prefers conflict. We have him for another 2 years possibly 6 years and I don’t think this will stop while he is in control.
Sputnik: How damaging could this all be for the economies of China, America and countries in the EU?
Steve Keen: I don’t think it’s going to be as damaging as main stream economics would make out, because they have an obsession with their allocated efficiency, the theory that you have to resource efficiently if you’re to get the maximum out of your existing resources.
That completely ignores the fact that what actually creates resources over time is investment and it’s quite possible this could provoke a range of investments to make up for the inability to trade and buy goods from America courtesy of retaliatory tariffs and china could expand its state investments.
It won’t be negative overall but it could be disruptive to existing supply chains.
Sputnik: How likely are we to see a descaling of tariffs by all sides now or has the trade war gone too far?
Steve Keen: I don’t think we will, humanity has a record of bashing heads together, when they should be using them instead.
It could happen that there is some de-escalation but the way things are going at the moment its retaliation rather than de-escalation and that’s the world Donald Trump thrives.
The views expressed in this article are solely those of Steve Keen and do not necessarily reflect the official position of Sputnik.