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Fowl Play: Classes from the US, EU ’Hen’ Commerce Conflict

TALKING POINTS – Trump, Commerce Wars, Tariffs, Hen Conflict

Trump tariffs pose asevere danger to international progress and stability

Hen Conflict of 1960’s is a lesson concerning the hazard of commerce wars

Threat-friendly property, international markets susceptible to risky swings

Protectionist insurance policies adopted by the administration of US President Donald Trump have created a commerce battle with China and triggered vital volatility available in the market. The outlook for future progress and multilateral commerce relations seem bleak. Traditionally, protectionism and tariffs have produced political and financial instability and diminished international wealth by a considerable margin.

From 1961-1964, the EU and US engaged in a buying and selling battle that later got here to be recognized – albeit comically – because the Hen Conflict. The retaliatory nature of the battle is mirrored within the latest commerce wars the White Home has ignited. The financial battle again then triggered market volatility and ended up implementing an auto tariff within the US that is still to today.


In each Europe and the US, rooster was largely thought of a delicacy. Nevertheless, after the Second World Conflict, the US switched to manufacturing unit farming chickens and flooded the market with low cost poultry. North-American rooster consumption in West Germany alone elevated by 23%.

This triggered a despair in rooster costs, ruffling Europe’s feathers. In 1961, France, West Germany and several other European states imposed tariffs and worth controls on US-imported rooster. US poultry exporters’ gross sales fell 25%, amounting to losses of round $210 million (in 2014 ).

Hen Commerce Wars

DailyFX Trade Wars Infographic

See our full interactive historical past of commerce wars right here.

The US and Europe had been cooped up in negotiations squawking at one another for the subsequent 18 months, with rising animosity between spilling over into different facets of relations. At one level throughout a NATO debate on nuclear disarmament, Senator William Fullbright introduced up the rooster commerce battle and the talks grew to become so heated that he even threatened to withdraw US help from NATO allies.

After diplomacy failed in 1963, US President Lyndon B. Johnson imposed a 25% tariff on dextrin, potato starch, brandy and lightweight vehicles. The latter two duties had been particularly meant to hit France and Germany, respectively.

All tariffs had been in the end lifted in 1964, besides the 25% tax on gentle vehicles. The US auto trade started to closely foyer Congress to maintain the tax in place as a solution to insulate them from overseas competitors. Customers ever since have – fairly actually – paid the value.


As historical past exhibits, commerce wars have the potential to pressure financial relations and political alliances. Insurance policies placating industries in search of to achieve benefit can even make for long-term losses in total welfare. It’s subsequently not radical to recommend that commerce wars pose a severe menace to international progress and stability.

On June 1st, President Donald Trump launched a 25% tariff on all imported metal and 10% on aluminum. Mexico and Canada responded with their very own tariffs. The EU retaliated with tariffs towards key US exports corresponding to orange juice, whiskey and bikes.

The retaliatory tariffs through the Hen Conflict and the latest financial battle between the EU and US have triggered vital volatility in international capital markets. Professional-risk property and currencies – just like the New Zealand and Australian – have declined in 2018.

Australian and New Zealand Greenback Undergo Amid Commerce Conflict

Fowl Play: Lessons from the US, EU 'Chicken' Trade War

The Euro additionally took a success amid the commerce dispute because the regional and international financial outlook grew to become extra unsure. Progress is prone to be slower if the US and different financial powerhouses proceed to egg one another on. Threat-off property such because the Swiss Franc and Japanese Yen are prone to outperform towards this backdrop.

Swiss Franc Outperforming Amid Commerce Wars

Fowl Play: Lessons from the US, EU 'Chicken' Trade War

The Hen Conflict is one out of many financial conflicts the US and EU have engaged in. The Pasta Conflict in 1985 noticed tariffs go up on European pasta, adopted by retaliations towards US imports of walnuts and citrus; the Banana Commerce Conflict of the 1990’s – which was unresolved till 2009 – noticed an identical tit-for-tat dynamic.

On stability, commerce wars are neither brief nor straightforward to win. They’re lengthy, arduous and cost-incurring processes that go away everybody worse off than earlier than. If the US continues to impose protectionist insurance policies, international fairness markets will stay susceptible to violent volatility and international financial efficiency is prone to endure.

Buying and selling Assets

— Written by Dimitri Zabelin, Jr Foreign money Analyst

To contact Dimitri, use the feedback part beneath or @ZabelinDimitrion Twitter

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