The price of oil falls 6% and stock markets plummet. International economics textbooks indicate that the more protectionism there is, the weaker global trade becomes, and everyone ends up poorer. "Beggar-thy-neighbor" is the ultimate result of protectionism. And a poorer neighbor buys fewer of our goods.
One example is enough. During the previous Trump administration, Argentine exports to the United States fell from $4.535 billion to $4.109 billion between 2017 and 2019. In 2020, they fell even further, but this was due to the pandemic.
It wasn't until 2022 that they reached $6.666 billion, already with Biden in office.
In the previous trade war, when Trump in his first term raised tariffs on China, Argentine sales to the world grew, going from 58.649 (2017) to 65.115 (2019), an increase of 11%, although it was in the midst of a devaluation of the peso and with a government that had removed withholdings on wheat and corn, and reduced those on other merchandise.
How did the world fare during the trade war? Trade was at $17,5 trillion, and by 2019, it reached $18,7 trillion. The increase was 6,85%, almost normal for those times, meaning it didn't change significantly.
El impact was on commoditiesFor example, let's analyze the case of soybeans.
Global soybean trade represented $58 billion in 2017 but only $55 billion in 2019, albeit with many more tons traded. In the first year analyzed, it was $151.488 and $155.633 in 2019, meaning more tons but at a much lower cost. The average price fell from $380 to $282 during that period. The drop in soybeans was mirrored in other commodities. One forecast, if the US-China trade war deepens, is a weakening in the price of commodities exported by Latin America.
Further back in time, the 1929 crisis, which spread due to the rise in tariffs, ultimately impacted all countries, and now with a more globalized trade system.
Benefited and punished
Trump suspended tariffs on Mexico and Canada, following promises by both presidents to improve border control and increase troops to check for illegal drug entry.
China, on the other hand, didn't wait for negotiations and immediately filed a complaint with the World Trade Organization. During the previous Trump administration, the Asian giant did the same, taking the complaint to the WTO, and the case was resolved positively for China, although Trump ignored the ruling of that global body.
China, the world's largest exporter, dedicates almost 15% of its sales to the US, and replacing that market is not easy. The term "overcapacity" was already being discussed in the United States, since Asia has more production capacity than the world can accommodate, and this overproduction will eventually enter through unfair mechanisms such as dumping, causing harm to local industries. In the midst of a discussion about production, they are closing the door to their main market, so their short-term strategy is to seek alternative markets, where Europe is stagnant, Latin America is unable to absorb so much merchandise, and Asia faces strong competition from other economic producing countries.
New Scenario
Later in the trade war, Trump imposed 25% tariffs on steel and aluminum imports from all sources, including Argentina.
Argentina exported around $600 million worth of both products to the country, and this could have a significant impact, and could see a repeat of the decline in our sales to that market, as occurred during Donald Trump's first term.
Argentina sold less to the US during the Trump administration, but more to the world, following its devaluation and lowering of its withholdings. The current context is different: a lagging dollar and high withholdings. It should be noted that all this comes at a time when Argentina has been losing global market share for 20 years.
The author is a Specialist in International Trade and holds a Master's degree in Tax Administration and Public Finance, with a solid academic background and extensive experience in foreign trade and customs policies. He teaches at the National University of Córdoba (UNC) and the Catholic University of Córdoba (UCC), where he lectures on courses related to international trade and trade facilitation. He is also an accredited expert of the World Customs Organization (WCO) and a specialist in trade facilitation.
