The subject of international trade is all over the media at the moment, this is largely due to the USA introducing new trade tariffs.
International trade agreements are made to benefit countries with a surplus outlet, reduce market fluctuations, lower costs, produce efficiency and much more. When tariffs are amended on a large scale then this throws the balance of trade into a spin.
But what is a trade tariff? A trade tariff is more commonly known as a customs duty or a tax levied on goods made abroad. Countries impose trade tariffs to try to boost their own economies, with the theory that consumers will buy local produce if the cost of imported goods are more expensive.
The USA’s new trade tariffs (specifically on China) has resulted in a Trade War. President Trump has vowed to impose trade tariffs on $50 to $60 billion dollar’s worth of Chinese products. He has done this mostly because of the alleged Chinese theft of product design and ideas, he claims that the White House has a list of over 1000 products which could be hit with tariffs of 25%. At the beginning of this month, the US announced that there would be a tariff of 25% applied to all steel imports and a 10% applied to aluminum imports.
But what do these tariffs mean for the rest of the world? In essence, the tariffs imposed by the US will affect people all over the world, especially since China is threatening to retaliate, by taxing US agricultural and industrial products, and with this in mind, China could also tax big companies such as Apple, which would hit them hard and force them to pass these charges onto the consumer. The WTO was quoted this week saying that this could have a ‘severe’ economic impact.
Europe benefits by having a free trade agreement between its members and implementing a joint customs tariff for foreign importers. The EU is the world’s biggest trader, having 16.5% of the worlds imports and exports. US attribute 14.3% of the total imports into the EU, and the EU exports 20.6% of their total exports to the USA.
Although the EU are exempt from the newly implemented steel tariffs, the start of a global trade war will impact consumers all around the globe which will inevitably make it harder for companies to operate and again resulting in these costs being forced onto the consumers.
Using Cyprus as a hub, can ensure businesses are able to trade freely within the European Union, and thus exempt from additional trade and import/export taxes.
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