Donald Trump’s comprehensive overhaul of US trade policy this week signals the end of the globalization era, causing widespread concern among individuals, governments, and investors globally. No one should have been surprised, Trump stated.
The introduction of 10% to 50% tariffs on US trading partners led to a significant decline in stock markets after Trump announced a “declaration of economic independence” that drew comparisons to Britain’s Brexit.
However, Trump, who won re-election by promising that tariffs would make America great again, has consistently advocated for the imposition of widespread tariffs throughout his career. In his White House Rose Garden speech, he mentioned that he had been discussing the idea for 40 years.
Despite this, many businesses, economists, and politicians believe that Trump’s trade plan is misguided, flawed, and risky. Some have even suggested that it could have been written by artificial intelligence software, such as ChatGPT. Nonetheless, Trump’s consistency in advocating for tariffs over the decades is undeniable.
Trump’s enthusiasm for tariffs is considered uncharacteristic for him, as he is typically seen as a conventional politician lacking deep convictions. However, when it comes to tariffs, he seems to have a profound belief in their potential.
In 1987, Trump took out full-page ads in newspapers advocating for such a strategy and argued that other major economies were the “greatest profit machines ever created”. He proposed taxing these wealthy nations rather than the United States.
Now, eight years into his first term and 10 weeks into his second, he is finally taking concrete actions to implement this vision, disregarding warnings of potential negative consequences.
Trump has stated that tariffs will unlock the US economy, revitalize its industrial areas, and bring in substantial financial gains for the federal government. However, the initial actions of his second administration were less decisive and more hesitant than anticipated.
The focus initially narrowed to a few nations, including China, Canada, and Mexico. While China faced significant impacts, tariffs on Canada and Mexico were hindered by a series of deadlines, delays, and exemptions. The imposed tariffs mainly targeted steel and aluminum.
On the day dubbed “liberation day” by Trump and his aides, he made an effort to draw a clear line under weeks of uncertainty and imposed the universal and “reciprocal” tariffs he had promised during his re-election campaign.
Defying the concerns and forecasts of mainstream economists and corporations, Trump relied on his instinct. Historically, the imposition of tariffs has often had adverse effects. The Smoot-Hawley Tariff Act of 1930, which raised tariffs on hundreds of imports, is widely considered to have prolonged and deepened the Great Depression.
Trump’s analysis of the past and ambitious predictions for the future have faced swift rebuttal. The president envisions a new Golden Age, with millions of new jobs, increased US exports, and substantial tariff revenues. However, skepticism remains high outside of his administration.
Eswar Prasad, a professor of trade policy at Cornell University, stated that the Trump tariffs represent a departure from the benefits of free trade for American businesses and consumers. The actions taken by Trump, which extend to practically every major US trading partner, are expected to have severely disruptive effects on the US economy.
The cost of Trump’s tariffs will ultimately be borne by US companies and consumers, rather than foreign companies exporting goods. Import tariffs are paid by importers rather than exporters. The Yale Budget Lab estimates that Trump’s tariffs will increase the average US household’s costs by $3,800.
Jeremy Horpedahl, an adjunct scholar at the libertarian Cato Institute, wrote that these tariff increases could surpass the post-Smoot-Hawley levels of 1930 and represent some of the largest tax hikes in US history. Higher prices will be paid by US consumers and businesses as a result of these new levies.
If Trump is correct, and his long-held dream reinvigorates the world’s largest economy, benefiting its citizens and transforming its industrial base into a manufacturing powerhouse, his administration will be considered one of the most successful in recent history. On the other hand, if he is wrong, the very Americans who voted for him to reduce the cost of living are likely to be the ones most affected.
Larry Sabato, director of the University of Virginia’s Center for Politics, placed his bet on experienced mainstream economists rather than Trump and his team. The outcome of this gamble remains to be seen.
Source: https://www.theguardian.com/us-news/2025/apr/04/trump-tariffs-economy
