A Trade War Like No Other: How Trump's Tariffs Could Reshape Global Economics

President Donald Trump has initiated a dramatic shift in US economic policy by imposing tariffs of at least 10% on nearly all imports. This move is not merely protectionist; it marks a significant rollback to the early 20th century’s era of trade barriers, positioning the US above other major economies like the G7 and G20—even aligning it with countries known for their low tariffs like Senegal, Mongolia, and Kyrgyzstan.

Historically, the US used tariffs as a primary revenue source until 1913, when it shifted towards a system supported by federal income tax and reduced trade barriers. The Trump administration, however, seems to have reverted to the belief that high tariffs will stimulate the American economy and reduce the $1.2 trillion trade deficit by labeling imports from countries with trade surpluses as ”cheating”.

This perspective is rooted in the discontent over globalisation, particularly in light of the ”China shock” following China’s entry into the World Trade Organisation in 2001. While US consumers benefitted from cheaper goods, approximately 2.4 million American jobs were lost, concentrated in manufacturing sectors of the Rust Belt. Despite the adverse impacts, the tariffs are viewed by some as a potential boon for American jobs, particularly in manufacturing.

However, this new approach may alienate traditional trade partners and disrupt established supply chains. As countries reconsider their alliances and trade strategies, the consequences for major American corporations could be severe. For instance, companies that relied on affordable products manufactured abroad are likely to see significant changes in their business models, potentially leading to a recession.

Critically, the implementation of these tariffs is expected to trigger a global economic fallout, wherein the very fabric of international trade is challenged. The administration’s abrupt changes pose risks not just to the US economy but also invite retaliatory measures from affected nations, leading to a widespread trade conflict that could further destabilize the already shaky global market. As the US ventures further down this protectionist path, it may find itself unwittingly isolated in an increasingly interconnected world.