America pushes trade tariffs back to 1930s level

(Sharecast News) - America moved ahead with trade tariffs that some described as a "worst case scenario". "Admittedly, a lot is still unclear, and fully quantifying the impact of such a tariff tsunami, which actually brings back tariff levels of the 1930s, is almost impossible," economists at ING said.

Investors were initially cheered the night before when news broke of a minimum across the board 10.0% tariff.

But that optimism quickly evaporated as it was later announced that the levy on the EU would be 20.0% and at least 54% in the case of China.

The UK got off lightly with a tariff of just 10.0% placed on its exports.

Market observers generally believe that the US administration is, at least in part, pursuing a negotiating tactic.

Nonetheless, one big risk for financial markets - likely the biggest - was that countries might now retaliate, setting off a chain of further 'tit for tat' increases.

Roughly a week before, ING had estimated the short-term hit to the bloc's GDP growth at 0.33% and at possibly 0.87% in the long-term.

In the shorter-term meanwhile, inflation was likely to rise, although longer-term tariffs might be disinflationary, ING pointed out, as exports from China were diverted to the EU.

In any case, negotiations might see a reduction of those US tariffs.

Indeed, German finance minister, Jörg Kukies, recently backed a free trade area between the US and the EU, reviving a proposal that had already surfaced - but later been shelved - many years before.

A free trade would of course be quite positive for both economies.