Throughout its history, The US was almost always involved in warfare. It is estimated that since 1774 the world’s first economy was at war 91% of the time. At first, many of them took place on American soil, but over time they moved abroad.
According to data from the Council on Foreign Relations, an American non-profit organization specializing in foreign policy and international affairs in the United States, currently, there are at least 26 conflicts worldwide. Five of them – the war in Afghanistan, territorial disputes in the South China Sea, the crisis in North Korea and the confrontation between the US and Iran – have a critical impact on US interests.
In recent years, American presidents have remembered that they have at their disposal a series of much more deadly weapons than bazookas, M16s or AK-47s, sanctions and tariffs. In mid-2019, the US had 7,967 sanctions in force. They included so many individuals, such as, for example, the Mexican drug trafficker Joaquín ‘El Chapo’ Guzmán; companies, such as Cubacancun Cigars and Gift Shops; and even entire governments, like Iran, Russia or Venezuela.
Evolution of the dollar / ruble currency pair.
To check the impact of sanctions, we will use as an example Iran. As the graph below indicates, the economy of the Middle East country was severely affected for several years by sanctions imposed by the international community on the country’s nuclear program.
In 2015, President Hassan Rohani agreed to limit Iranian nuclear activities in exchange for the lifting of those sanctions. A year later, Iran’s economy recovered and GDP grew 12.3%, according to the Central Bank of Iran.
The reinstatement of US sanctions in 2018 caused the withdrawal of foreign investment. Both US and foreign companies were banned from doing any kind of business, including trade, with Iran, under penalties of severe sanctions.
Evolution of the GDP of Iran.
However, not everyone learned the lesson. Having achieved persuade France not to apply a digital tax That would harm its tech companies, the US faces a similar problem from Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom.
The Trump administration has already announced that the approval of the call ‘Google rate’, will force to impose tariffs on the exports of these countries. It can do so under section 301, if it is found that the foreign country is violating trade agreements or engages in other unfair trade practices. It should be mentioned that The US used the same route to impose tariffs on some 360,000 million dollars in goods from the second economy largest in the world, China.
Without a doubt, if these countries finally decide approve the digital tax, we will see important countermeasures. The question is whether it is worth it.
*** Igor Kuchma is an analyst at Trading View.