Expert Q&A: Dr Eric Golson on global trade fallout from US tariffs

1. Will US allies retaliate, and how far will they go?

"The level of retaliation is really an outstanding question. The Chinese have responded hard and fast with their new 34% retaliatory tariff. The British and EU seemingly do not respond quickly: the British government is conducting business surveys and other analysis prior to developing a retaliation strategy. This leaves open the possibility of negotiations with the Americans to reduce the tariffs. But I think more likely is everyone realizes that the US position is not particularly viable given how damaging it is to American businesses like Apple and Nike, and the American stock market. So they might also be gambling the Americans have to remove the tariffs themselves before any retaliation is needed. If this does drag on and do move to fully to a retaliation phase, the damage to the global economy will become very serious."

2. Can the World Trade Organization still enforce rules?

"The American government has refused to appoint justices to the WTO appellate body, so the WTO rules cannot be enforced. The WTO mechanism for this, called the dispute resolution mechanism, is very well designed to deal with excatly these circumstances. But its rulings cannot be upheld unless the appellate body has justices to make/confirm the decisions."

3.  How will tariffs impact inflation (specifically UK) and global prices?

"In the short run, we could actually see deflation in the UK as international prices will fall because goods which were due for the American market now will flood other countries. However, in the long run, we will see supply side inflation as the global value chains which have delivered significant growth and lower prices for the last 25 years will fall apart."

4.  Is this a short-term tactic or a long-term shift in global trade?

"This is the major unknown. I think the economics of the international trade system mean this is a short-term tactic which will not work. American businesses and mobile international capital make significant profits from this. History tells us that short-term tariff raising tactics are generally negotiated away for lower tariffs and more free trade. But we have also not seen anything like what has just been done since the great depression."