Trade war and the economy: global politics is coming ever closer to our wallets

Global politics has rarely affected what we consume, produce and pay for as directly as it does today. American trade decisions influence not only jobs but even pension levels where they depend on financial‑market performance. In this commentary Dr hab. Artur Klimek, Professor at WUEB, explains why foreign trade matters for everyone and how current tensions shape our economic reality.

Trade once worked in the background

Foreign trade used to function almost invisibly for the average person. Although there were occasional problems, they rarely made headlines. Today the situation is quite different: media reports appear with such frequency that it is difficult to conduct an analysis that would allow rational decisions.

Where does the “tariff war” come from?

The debate about the tariff war stems from different interpretations of foreign trade. The world economy exhibits large imbalances: some countries run surpluses because they export more than they import (for example China), while others run deficits (for example the United States). These values should not be viewed as losses or gains; what matters is how they affect economic growth and the labour market. Measuring these imbalances can be misleading. The United States imports many products from China whose value includes components previously exported from the U.S. to China.

The opportunities and costs of foreign trade

Trade brings not only benefits but also problems. Economic analyses confirm the existence of the “China shock”: firms in the U.S. and Western Europe offshored large portions of production to China, harming local economies and communities.

When trade becomes a matter of security

Concentration of production has become extreme. China currently controls nearly 70 per cent of the materials needed to produce electric‑vehicle batteries. Trade is also a matter of life and death; developed economies depend heavily on supplies of active pharmaceutical ingredients for antibiotics, and estimates suggest that about half of global production occurs in China. In the event of rising geopolitical tension, delivery of these critical products could be disrupted.

USA–China – but also the rest of the world

The main axis of the tariff war runs between the United States and China, yet U.S. imposition of universal, reciprocal tariffs has drawn most countries into the dispute. Trade concerns not only physical goods but also services. The U.S. records a deficit in goods trade with the European Union, while the EU buys more services from the U.S. than it sells to it.

Motivations are not always clear

The motives for U.S. tariffs are ambiguous. Depending on circumstances, officials cite reducing the trade deficit, increasing budget revenues, protecting national security, geopolitical rivalry, limiting narcotics trafficking, restricting immigration or bringing production back home.

The economy does not like chaos

The biggest problem lies in the way tariffs are introduced. Inconsistent actions by the U.S. administration and frequent changes and exceptions breed uncertainty among consumers and businesses and unsettle global politics. Companies, rather than focusing on creating better products, try to manoeuvre in a constantly changing environment. In the short term firms may adjust inventory levels or accept lower margins; in the long run such uncertainty slows investment, on which economic development and employment depend.