In Depth: Trump’s Trade Wars Put America at the Heart of the Coming Economic Storm

[para. 1] At the beginning of Donald Trump's presidency, the anticipated economic boon from his policies has not yet materialized. Instead, the U.S. stock market experienced declines, fueled by concerns over Trump's unpredictable agenda and fears of a potential economic slowdown.

[para. 2] Since Trump's inauguration, the S&P 500 and the Nasdaq Composite have decreased significantly, though markets have somewhat stabilized by late March. However, ongoing policy uncertainty continues to weigh on both the economy and investor sentiments.

[para. 3] There is notable anxiety among working-class Americans as tariffs drive prices up, raising worries that wages may not keep pace. This worry is reflected in consumer confidence data, with the University of Michigan’s index dropping significantly and the U.S. Chamber of Commerce’s consumer expectations index hitting a low point.

[para. 4] Additionally, businesses are impacted by Trump's trade policies, which have led to increased prices for materials and caused the U.S. Purchasing Managers’ Index (PMI) to dip back into contraction.

[para. 5] While confidence has softened, most economists have not sounded the alarm yet. The labor market remains tight, potentially supporting consumer spending in the short term, though signs of economic damage could become evident by late 2025, as predicted by Brian Coulton of Fitch Ratings.

[para. 6] Despite planned tax cuts, the long-term effects of Trump’s economic policies are still uncertain. While current data do not point to a recession, the warning signs of a slowdown are hard to ignore.

[para. 7] The U.S. trade deficit has widened significantly, impacting GDP growth projections. However, some analysts argue that headline figures may exaggerate the damage, attributing weak consumer spending in January to temporary factors such as severe weather.

[para. 8] An increase in U.S. imports, primarily due to a rise in industrial metal imports, reflects a flight to safety and a preemptive hedge against trade policy risks.

[para. 9] Despite these challenges, U.S. growth is predicted to slow down but not collapse. The economy is expected to undergo a difficult period but emerge stronger.

[para. 10] With limited fiscal options and growing trade tensions, tax reductions might be Trump's last option for spurring growth, though their effectiveness remains uncertain.

[para. 11] The implementation of tariffs represents the most significant shift in Trump's economic strategy. Compared to his first term, current tariffs have had a more profound impact.

[para. 12] The U.S. has imposed substantial tariffs on products from China, Mexico, and Canada, as well as on steel and aluminum. These measures are expected to lead to reciprocal tariffs from U.S. trading partners.

[para. 13] Analysts warn of a possible global trade war, with tariff rates projected to increase significantly by 2025, reaching the highest levels since the mid-20th century.

[para. 14] Trump's strategy to bolster U.S. jobs through tariffs is seen as flawed by experts, as rising costs ultimately undermine efforts to revitalize domestic manufacturing.

[para. 15] Though tariffs might temporarily contain inflation, they could more severely impact global economic growth in the long term.

[para. 16] As U.S. trade policies become more unpredictable, the global economy is pushed towards fragmentation, forcing countries to question the future direction of international trade policies.

[para. 17] Global trade responses have varied. Some countries have retaliated with their own tariffs, while others have sought to improve U.S. relations by increasing investments or providing market access.

[para. 18] Over time, the costs of maintaining U.S. market access might surpass the benefits, leading to a diversification of trade relationships.

[para. 19] Research indicates that tariffs from Trump's first term have caused a tangible reduction in U.S. foreign direct investment due to heightened trade policy uncertainty.

[para. 20] Should major export-dependent economies like Germany or Japan reduce their reliance on the U.S. market, they might face GDP losses, but these would not pose existential threats.

[para. 21] Experts suggest that the BRICS countries could make up for the loss of the U.S. market within a few years by expanding trade with other nations, pressing for more free trade agreements to counter unilateral policies.