Will Trump's victory trigger a global trade war?

Donald Trump promised during his campaign that he would tax all goods imported into the US if he won back the White House. After his victory, companies and economists around the world are trying to figure out how serious he is.

Trump sees tariffs as a way to stimulate the US economy, protect jobs and increase tax revenue.

In the past, he has imposed targeted tariffs on individual countries such as China or certain industries, such as steel.

But Trump's campaign promise to impose 10 to 20 percent taxes on all foreign goods could have an impact on prices around the world.

Last month he seemed to single out Europe.

“The European Union sounds so beautiful, so beautiful, doesn’t it? All the nice little European countries coming together… They won't take our cars. They don’t take our agricultural products,” he said.

“They sell millions and millions of cars in the United States. No, no, no, they will have to pay a high price.”

BMW, Mercedes and Volkswagen Stocks all fell between 5% and 7% after Trump confirmed the victory. The USA is the largest export market for German automobile manufacturers.

During his campaign, Trump said tariffs were the answer to countless problems, including containing China and preventing illegal immigration.

“Tariff is the prettiest word in the dictionary,” he said. It's a weapon he clearly wants to use.

While much of this rhetoric and actions are aimed at China, it doesn't end there.

Some jurisdictions, such as the EU, are already drawing up lists of pre-emptive retaliatory measures against the US after ministers failed to take seriously enough Trump's earlier threats of tariffs, which he later imposed.

Last week, G7 finance ministers told me they would try to remind Trump-led America of the need for allies in the global economy because “this is not about triggering a trade war.”

However, if “a very strong, far-reaching force is deployed,” Europe would quickly consider its response.

In the past, the EU imposed tariffs on famous American products such as Harley-Davidson motorcycles, bourbon whiskey and Levi's jeans in response to US tariffs on steel and aluminum.

A senior euro zone central banker told me that U.S. tariffs alone “are not inflationary in Europe, but it depends on how Europe will react.”

Last month The IMF told me A major trade war could hit the global economy by 7%, or the size of the French and German economies combined.

The question for the British government is where exactly the United Kingdom should position itself after Brexit in a plausible, if not certain, transatlantic trade war.

The UK's previous aim has been to move closer to the EU, including in terms of food and agricultural standards. This would make a close trade agreement with the US very difficult.

The Biden administration was not interested in such a deal. Trump's still highly influential top trade negotiator Bob Lighthizer even said the assumption that the UK would stay close to the EU to support its own companies prevented him from pursuing a deal.

“They are a much bigger trading partner for you than we are.” he told me in an interview.

The UK could try to remain neutral, but would struggle to escape the crossfire, particularly when it comes to trade in medicines and cars.

The British government's rhetoric suggests it might try to act as a peacemaker in global trade wars, but would anyone listen?

Britain could choose a side and seek to be exempt from the broader Trump tariffs.

Diplomats were encouraged by more pragmatic economic advisers to the president-elect who suggested friendly allies might get a better deal.

Or would the world benefit more if the UK worked with the EU to prevent such trade tariffs from being applied?

Outside the US, what does the example look like for the rest of the world?

If the world's largest economy resorts to mass protectionism, it will be difficult to convince many smaller economies not to do the same.

All of this is up for grabs. Trump's warnings can be taken at face value. Nothing is certain, but this is how very serious trade wars can begin.