Trump wants to protect the auto industry with tariffs, but even his new favorite, Elon Musk’s Tesla, has warned that tariffs will bring it only losses
Donald Trump has plunged headfirst into a trade war with enemies and friends around the world. So far, it looks more like a chaotic artillery preparation than a well-considered offensive. Trump imposes, rescinds, suspends and raises import tariffs almost daily, threatening to bankrupt his neighbors and starve his own citizens to win the trade war.
Behind this chaos, the White House strategy is beginning to emerge, and it is not good for the world or America, economists warn.
They said even before the election that Trump’s attacks on free trade would make everyone poorer, but supporters and even critics of the American president urged them not to dramatize his statements. Some said Trump was bluffing to get concessions in negotiations, others said he would be deterred from taking radical steps by a falling stock market or deteriorating U.S. economic performance.
The reality has been harsher than expected. Trump is determined. He was not deterred by the falling stock market, the threat of accelerating inflation, or even the specter of a recession in the U.S. economy, which had shown miraculous growth before the election.
Trump spent the first half of March attacking his main trading partners – Canada, Mexico, China and the European Union. All but Mexico responded with a vigorous pushback.
Now there’s a pause on the trade front for a couple weeks, giving a chance for negotiations and a truce. If diplomacy fails to bear fruit, Trump is ready to launch a major offensive and has even already set its exact date – April 2.
“Some difficulties.”
Since the beginning of March, the U.S. stock market has collapsed by $5 trillion, reflecting a new reality. After Trump’s election, investors were giddy with excitement to buy stakes in U.S. companies, counting on rising profits following the promise of tax cuts and deregulation. After the first two weeks of the trade war, however, enthusiasm has been replaced by despondency, with a bright future rapidly fading into a fog of uncertainty.
Trump seems unaffected by this. If in his first term he kept a close eye on the stock market, boasted of its growth and considered it a measure of achievements in the real economy, this time he is ready to make sacrifices.
Canadians have started an anti-American “Elbows Up” flash mob in response to Trump’s tariffsAuthor photo,Reuters
Photo caption,Canadians have started an anti-American “elbows forward” flash mob in response to Trump’s tariffs
In the midst of the stock sell-off, Trump was asked how he felt about it.
“I don’t follow the stock market at all,” Trump replied, adding that his tariffs were not to blame for the record drop in the indexes, but some ”globalists who see our country getting richer and they don’t like it.”
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Even if the American economy slows down, the difficulties will be temporary, Trump is confident: “There’s going to be a transition period because we’re up to a very big thing.”
“Tariffs are not only necessary to protect jobs. They will protect the soul of our country. They will make America rich and great again,” Trump told Congress in early March. – There will be some challenges, but we’re not embarrassed by that. It’s no big deal.”
Ruin your neighbor and yourself
Trump’s trade policy borrows from the 1930s, the era of tariff wars and devaluations under the slogan “ruin your neighbor.” Back then, it ended with the Great Depression and World War II.
Trump is confident that this time the old recipe will work to his advantage. He tried it out in his first presidential term. As economists found out, then the confrontation with China damaged the American economy.
This time it’s much bigger and more serious.
Last time, Trump taxed imports of goods from China by $380 billion and from Europe by $8 billion, but introduced them gradually during 2018 and 2019. This time, Mexico and Canada were added, and the total amount is already three times larger – about $1 trillion.
Trump started the trade war with the world by attacking his neighbors and China. Who is next?
At the same time, these duties are introduced not gradually, but at once, and on April 2, the amount will grow at least one and a half times to $1.5 trillion only due to temporarily postponed tariffs on two neighboring countries. And Trump’s promised “retaliatory” duties on all U.S. trading partners will be added.
“Everyone is going to be affected. Some countries more, others less. But in the end, everybody loses,” Christine Lagarde, former IMF chief and now president of the European Central Bank, told the BBC.
She hopes the next two weeks before all of Trump’s other tariffs take effect will be a time of intense negotiations. If they fail, a “real trade war” will break out, Lagarde said on the BBC’s HardTalk program.
“It will no longer be just a cause for concern. A trade war would have serious consequences for global economic growth and prices around the world, but especially in the United States,” Lagarde said on the BBC HardTalk program.
