Opinion: How Far Can Trump’s Economic Policies Go?

[para. 1] U.S. President Donald Trump announced a plan for “reciprocal tariffs” on April 2, targeting imports from all trading partners, in what marks an increase in unilateralism and protectionism. China's response includes imposing a 34% tariff on U.S. imports, matching Trump’s levy against Chinese goods.

[para. 2] The U.S., as the largest economy and consumer market, significantly affects the global economy with its tariff policies, underpinned by the U.S. dollar being the global reserve currency. Shortly after Trump returned to the White House, he introduced various economic initiatives sparking global and domestic turmoil. These policies include reducing government spending, eliminating federal positions, deporting undocumented immigrants, raising tariffs, and encouraging manufacturing reshoring. These actions lack coherence, often contradict themselves, and change unpredictably, suggesting they are unlikely to be successful long-term.

[para. 3] Through increased tariffs, the Trump administration aims to protect U.S. industries and promote reshoring manufacturing jobs, but this approach disregards modern industrial practices. Higher tariffs generally strengthen the dollar, hinder foreign investment, and reduce export competitiveness. While supposed to combat inflation, higher tariffs increase the costs of imports, raising prices for American consumers. Investment banks predict U.S. tariff rates may reach levels akin to those in the 1930s, with Goldman Sachs suggesting these aggressive tariffs will increase inflation and unemployment, slowing economic growth and raising recession risks.

[para. 4] Mass immigrant deportation exacerbates the U.S. labor shortage, driving up service sector costs and potentially worsening inflation. Moreover, expanding deportation operations and building a border wall demands more federal spending and personnel, contradicting the administration’s own goals to minimize federal costs and workforce, adding to the complexity and confusion of the U.S. economic landscape and raising global economic risks.

[para. 5] The Trump administration’s erratic tariff policy introduces inconsistency, making it difficult for investors and consumers to set stable expectations. Tariffs on Canada, Mexico, China, and the EU frequently change, sometimes on short notice, which undermines basic economic principles and is likely to backfire. This disrupts international trade rules, destabilizes global supply chains, and triggers dissatisfaction and counter-actions from trade partners, including U.S. traditional allies.

[para. 6] Globalization has markedly improved both global development and human welfare, benefits not easily reversed. The complex global industrial and supply chains, forged over decades, resist forced alteration. Unilateral, protectionist, and populist policies do not rectify domestic inequality, and global challenges like climate change require cooperative international approaches. Trump’s tariff strategies may ironically strengthen international cooperation against these tactics, an outcome likely unforeseen by American policymakers.

[para. 7] Since initiating reform and opening-up policies in the late 1970s, notably post-WTO accession in 2001, China has actively engaged in and benefited from economic globalization, advocating for free trade and multilateralism. China, now the second-largest global economy, promotes an open world economy, supporting WTO-centered multilateral trading, which aligns with its interests and stabilizes global economic balance.

[para. 8] As the U.S. pursues strategic "decoupling" and trade wars, China responds with countermeasures. Trump's earlier trade conflicts failed to decrease the U.S.-China trade deficit effectively. China holds that the U.S. and China share vast mutual interests and can mutually prosper, benefitting themselves and the world.

[para. 9] With midterm elections approaching, the Trump administration faces challenges within America’s institutional parameters. Future policy dynamics between Trump and the Democrats remain uncertain. However, the chaotic, contradictory, and erratic nature of current policies foretells likely failure, causing harm to the U.S. and its international partners.