Tariffs could result in a global recession

Note: This post was first published on Patreon on 31 May 2018

The Trump Administration has decided to impose steel and aluminum tariffs on EU, Canada and Mexico, America's closest allies. The natural question is: will this lead to a recession? The short answer is yes. I will explain how and what to look for.

First, let's be clear, the tariffs on steel and aluminum are not big enough to have an appreciable economic impact on the EU, Canada and Mexico. Dani Rodrik gets it right when he says on Twitter, "Wouldn't it be grand if the EU said instead: 'Trade restrictions hurt first and foremost countries imposing them. You do not respond to self-destructive policies by aiming to shoot your own foot. So we will not do anything. We will just wait for good sense to return to the U.S.'

If the EU ...


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