What consequences could a trade war sparked by Trump have for Ukraine?
On 11 February, US President Donald Trump initiated events that could lead to a full-scale trade war, the consequences of which may prove highly undesirable for Ukraine as well.
The White House issued a statement about reinstating a 25% tariff on steel and aluminum imports. This measure was announced as a way to protect America's critical steel and aluminum industries, which have been harmed by "unfair trade practices" and global dumping in the steel and aluminum markets.
The justification for these tariffs is the large-scale subsidisation of the production of these goods by the governments of other countries.
Read more about Trump’s decision and its consequences in the column by Olena Omelchenko, a partner at the law firm Illyashev & Partners – One step away from a big 'customs war': how Donald Trump began to undermine the global Economy.
The author reminds readers that the agreements of the World Trade Organization (WTO) establish clear rules and procedures to protect national producers from dumping, subsidised or increasing imports.
"Specifically, WTO rules require the conducting of anti-dumping and countervailing investigations against countries and companies that violate competition. Investigations take about a year, and interested parties must have the right to protect their interests through a special process," writes Olena Omelchenko.
Washington though, according to the partner at Illyashev & Partners, has decided to act unilaterally, citing its own legislation and ignoring WTO agreements, provoking other countries to retaliate.
According to the author, the hardest-hit countries will be those traditionally considered allies of the United States: Argentina, Australia, the United Kingdom, Brazil, Canada, Japan, Mexico, South Korea, as well as EU countries and Ukraine.
At the same time, the White House explains that by granting exemptions to these countries, the US unintentionally created loopholes exploited by China and other countries with excess steel and aluminum production capacities, thereby undermining the goal of these exemptions.
Omelchenko suggests that the countries affected by the increased tariffs on aluminum and steel will retaliate and attempt to challenge the US decision at the WTO. This could destabilise the World Trade Organization’s trade system.
Beijing believes the measures against it were introduced based on unfounded and false accusations and that these tariffs not only violate WTO rules but are also discriminatory and protectionist.
In this regard, China has initiated consultations under the WTO dispute settlement procedure.
The question arises whether the WTO mechanisms can influence Washington?
"It is already clear though that decisions made within WTO procedures will remain solely in the legal sphere," the lawyer points out.
According to her, Beijing, not waiting for the arbitrators' decision, took retaliatory measures. Specifically, China imposed a 15% tariff on coal and liquefied natural gas from the US, as well as a 10% tariff on crude oil, agricultural machinery, and cars with large engines.
As the column’s author notes, on one hand, Beijing is resorting to legal mechanisms to resolve the trade conflict, but on the other hand, it is violating WTO agreements itself.
Other countries are prepared to act in a similar manner.
"This is why the future of global trade is hanging by a thread – if the conflict is not resolved in the short term, a trade war may unfold, affecting global supply chains and having repercussions for the world economy," warns the partner at Illyashev & Partners.
According to her, this is a very bad scenario for Ukraine, which, in addition to the war, will face additional economic problems and partners who will be focused on their own trade issues and resolving the trade conflict.