Asian Angle | Seeking the silver lining in Trump’s tariff turmoil

Though the discussion has focused on the potential negative impacts, there could well be a silver lining to the turmoil. While global welfare will be reduced by the overall increase in uncertainty and protectionism, there will be winners and losers, depending on how countries respond to this policy.

Retaliatory actions are unlikely to be helpful unless they can force the perpetrator to back down (which appears unlikely) or hasten the need for negotiations. In the interim, retaliatory tariffs will add to costs and the risk of escalation. Any potential benefit will depend on what exactly the negotiations produce and how countries use them.

If the negotiations result in tariff rate reductions, then this could be a net positive for both countries. As tariffs have been falling, non-tariff barriers have risen in unison and their dismantling could significantly encourage trade. Therefore, countries could use the pretext of targeting non-tariff barriers to confront entrenched vested interests at home that have successfully lobbied for protection, sometimes securing it for decades.