Trump trade war: Why a figure of 48% is important as escalation nears
Here is a number to lodge in your brain in the coming weeks and months: 48%.
Last year a group of economists carried out an an analysis on the economic impact of the Iron Curtain; how much trade actually took place from east to west in spite of all the restrictions during the Cold War. They came to the conclusion that, at its height in 1951, “the Iron Curtain represented a tariff equivalent of 48%”.
As the world limbers up ahead of what Donald Trump calls his “liberation day”, that figure is worth keeping in your mind.
Right now, the average dutiable rate of tariffs on China is somewhere between 30% and 40%. But in the event that the president imposes another 20% of tariffs on China, the level of tariffs between these two trade partners will rival or possibly exceed those Iron Curtain levels.
President Donald Trump speaks at the White House.
Pic: AP
No-one is sure what will happen next. What number will the President choose for his next round of tariffs? 10%? 20%? Or the 25% rate he has favoured for steel, aluminium and cars? Will the next round of tariffs announced this week be imposed on every country? Will they just be imposed on the so-called “dirty fifteen” the Treasury Secretary has talked about? Who, for that matter, are the “dirty fifteen”?
We don’t know the answers to these questions. Nor do other world leaders like Keir Starmer. Nor, for that matter, do many in the White House, it seems.
But, back to that number at the top. The tariffs being talked about by the president and his colleagues are now approaching serious levels. Once you start facing cumulative tariffs approaching 50% then, as we saw during the Cold War, many countries stop trading altogether.
And with those kinds of charges looming it’s no surprise many businesses and traders are taking radical steps to try to prepare for the coming months of chaos. Consider two examples.
The first is to be found if you look at the exports (transfers is probably a better word in this case) of gold from the UK to the US. Up until a few months ago these flows averaged about £22m a month. Then, as traders fretted about the imposition of tariffs and controls on everything (including gold), there was a totally unprecedented exodus of gold bars from the UK to the US – £1.2bn in December and £6.1bn in January. These numbers, it goes without saying, are totally unprecedented. We’ve never seen outflows like this before.
The other data point (somewhat related) is to be found by looking at the US balance of payments. Remember the whole point of these tariffs is to try to eliminate (or at least reduce) America’s trade deficit with the rest of the world. President Trump wants the country to produce more goods and import less.
Read more:
What do Trump’s tariffs mean for the UK?
Tariffs: The rewards and risks for US as trade war intensifies
But in the past year, the US trade deficit has literally doubled. Up from £67bn in January last year to £131bn this January. Again, this is unprecedented. It’s a hallmark of the fact that importers were scrambling to bring as much stuff into the country as possible (not just gold, but machinery, metals, cars, electronics – everything) before tariffs got imposed.
The great irony, then, is that the first impact of the Trump tariffs has been to send the trade deficit in the opposite direction from the one the President is aiming for. It will, of course, lurch back the other way in the coming months. But where it ends is anyone’s guess. In the meantime, more chaos and instability awaits. Hold onto your hats.
Thousands of people gathered in various cities across the US as protests against Donald Trump and Elon Musk took place in all 50 states on Saturday.
Around 1,200 demonstrations were planned in locations including Washington DC, New York City and West Palm Beach, Florida – just miles away from where the US president has this weekend played golf.
The “Hands Off!” protests were against the Trump administration’s handling of government downsizing, human rights and the economy, among other issues.
In Washington DC, protesters streamed on the grass in front of the Washington Monument, where one person carried a banner which read: “Make democracy great again.”
Thousands gathered in Washington DC to rally against various Trump policies. Pic: AP
Pic: AP
Another protester took aim at Mr Trump‘s handling of Russia and Ukraine, with a placard that read: “Stop Putin’s puppets from destroying America.”
Tesla boss Mr Musk also featured on many signs due to his role in controversial government cuts as head of the newly created Department of Government Efficiency (DOGE).
Demonstrators in NYC. Pic: AP
People marching in Atlanta, Georgia. Pic: Reuters
A rally in Vermont. Pic: The Brattleboro Reformer via AP
Terry Klein, a retired biomedical scientist, said she drove to the rally to protest Mr Trump’s policies on “everything from immigration to the DOGE stuff to the tariffs this week, to education”.
“I mean, our whole country is under attack, all of our institutions, all the things that make America what it is,” she added.
A drone view of the protest at the Utah State Capitol building. Pic Reuters
A protester sports a Handmaid’s Tale costume. Pic: Reuters
Pic: Reuters
Some at the various protests carried Ukrainian flags, while others sported rainbow attire and waved rainbow flags in support of the LGBTQ+ community.
Other protesters wore Palestinian keffiyeh scarves and carried “Free Palestine” signs.
Thousands marched in New York City’s midtown Manhattan and in Boston, Massachusetts, while hundreds gathered in the sunshine outside the Utah State Capitol building in Salt Lake City, and in the rain outside the Statehouse in Columbus, Ohio.
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Mr Trump – who shook financial markets with his tariffs announcement this week – spent the day in Florida, playing a round of golf before returning to his Mar-a-Lago residence.
People protest in Manhattan. Pic: Reuters
Activists in Palm Beach Gardens, Florida. Pic: AP
Some four miles from Mar-a-Lago, more than 400 people gathered – and drivers honked their horns in support of protesters who held up signs including one which read: “Markets tank, Trump golfs.”
The White House has said Mr Trump plans to go golfing again on Sunday.
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