With the world economy globalizing as never before, the possibility is growing that trade disputes may also assume global dimensions, with dire implications for the world's free-trade system. A case in point is the current international trade dispute sparked by the U.S. decision last month to impose high import duties on 14 types of steel products.
The United States and the European Union appear headed for an all-out trade war now that the EU, in retaliation for the U.S. action, has invoked similar "safeguards" -- emergency import restrictions -- against steel imports. Contributing to the tensions are, predictably, political factors on both sides -- notably, U.S. midterm elections this autumn and a French presidential poll later this month.
The worry is that the principle of free trade will suffer worldwide if America and Europe, the world's two largest economic regions, remain at loggerheads trying to protect their domestic interests. Japan, a major steel-exporting country, will likely be hit the hardest.
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