The recent expulsion of several diplomats by the United Kingdom and a similar retaliatory measure by Russia has been dubbed by the UN Secretary General as an apparent return to Cold War politics. The drama has now engulfed several European countries, the United States and Australia.
The Cold War ended in the late 1980s but the mentality still persists among some global leaders.
Only recently the US imposed tariffs on steel and aluminium from China allegedly for breaches of intellectual property rights. China has retaliated by imposing tariffs on a wide range of US products.
The actions and counter actions by the two most powerful economies in the world could potentially hit consumers hard, especially those in the United States, which already has a significant trade imbalance with China. China is better poised to cushion the effects of the trade war due to the large size and robustness of its domestic economy.
It is interesting to see how the situation will play out but one thing is sure, it is not going to be business as usual under Donald Trump, whose mantra is ‘America First.’
We are entering a new era of international trade, one in which free trade is giving way to naked self-interest by some of the dominant trade partners, led by the United States. What we are now seeing is a return to protectionism and trade barriers which could have an adverse impact on all economies, both large and small.