- Explanation: President Trump revealed one of the most aggressive tariffs In recent history, after announcing significant tours, like China, India and the EU, as well as 10% of the blanket increase in all other countries. While Bruising President Trump's foreign agenda maybe shaken markets, his approach is nothing new.
President Donald Trump says he wants to settle the conditions with Tariff agenda Announced this week. While economic sanctions It can go somehow to achieve their goals, experts are afraid that aggressive foreign policy can also isolate the largest economy on the planet.
This week, the White House has torn the decade of long book with some of the closest business partners. For example, the EU will be 20% of tariffs, while China is facing a cumulative increase of 54%.
And when President Trump said “all countries” would be subject to the day of liberation, he meant it. Nations that have not been given by a specified tariff face an immediate, blanket obligation of 10%.
In hours after the Rose Garden address Foreign leader They began to formulate their answers. Some, such as British Prime Minister Sir Keir Starmer, said they would have a “cold head” as the negotiations will continue, while the President of the European Commission Ursula von der Leyen promised Swift and ongoing retaliation if the agreements cannot be concluded.
The final question remains: Will the Protectionist agenda of President Trump pay off? Can America do again at the cost of burned bridges?
Or, will the foul on the pitfall discovered by its predecessors?
What is Trump's goal?
Minister of Finance Scott Bessnt laid in his Confirmation hearing President Trump's tariff plan.
Some are related directly to American people and businesses– For example, the creation and protection of jobs in the US, an increase in industrial capacity by making domestic products more competitive and increasing the income to finance investment for families and businesses.
Other objectives related to the attitude of America's attitude on the global phase – for example, reducing dependence on competing countries – especially the needs of national security – as well as the use of economic sanctions to progress in US security interests
President Trump's first row announced that he did not deal with any of these things of course: the instruments were used as negotiating tools in the debate on immigration and fentanyl supplies to the US
Professor Columbia Brett House He claims that there is another motive to Trump's action, an example of the fact that the White House has introduced individual and blankets. Said Luck“The President loves creating a situation where other countries or individuals have to come up with him. By creating different tariff rates on the basis of a country on Earth, each country has to complement and beg and negotiate with the White House on an individual basis.
“This is the essence of such power that the tyrant and autocrat try to create people and ensure that it is very difficult for them to unite and negotiate with a single voice.”
Cracking of tariff code
Other economists take a different opinion, partly inducing the White House, which shares its methodology, as formulated by tariff rates: essentially accepting the deficit of trade between the US and the country and the distribution of total goods imported from this nation and division into two.
“[The tariffs] are above all about eliminating addiction to the rest of the world – or what is perceived as [America’s] Excessive addiction to the rest of the world and other countries, ”he explained Joao GomesSenior Vice -Chairman of Research on Wharton Business School University of Pennsylvania.
“Removing a business deficit is the most important thing when you look at the numbers and understand how they are competed, it is only clear that they want to literally eliminate business balances. They consider it unacceptable vulnerability … It's not just politics, it doesn't sell nationalism.
“These are truly basic economic principles and maybe I will not agree with them, but at least now I understand what they want to achieve, and I think it will help with predictability.”
Was something like this before?
In order for economists to develop a comparison of remotely similar policy from the White House, they would have to dust up historical books – and turn the pages of a century.
In 1930, As the world sank into a great depressionPresident Hoover signed the Smoot-Hawley tariff law in the law in an effort to protect US companies and farmers from undermning cheaper agricultural products imported from abroad.
According to Douglas Irwin, the professor of the economy at the Dartmouth University, according to Douglas Irwin calculations, the economy professor at Dartmouth University, increased by an average of 41.1% after the law, according to Douglas Irwin's calculations, professor of economics at Dartmouth University. Likewise, the Fordney McCumber Tariff was in force in 1922 to be 21% to 38.8%.
For example, for comparison, 10% Trump placed, for example, in the United Kingdom or 20% placed on the EU, seems to be relatively more limited.
However, the economy has shifted in 100 years since the last major changes in tariffs –Globalization continued to increase Since then, the US economy has been fulfilled more closely by the health of its partners.
As Irwin Dartmouth stresses, in 1930 and 1922 as a percentage of GDP represented Only 1.4% and 1.3%. By 2025, the tariffs were announced before April 2 (those from Canada, Mexico and the initial 20% in China) in import worth below 5% of American GDP.
Lower tariffs to a much higher share of goods – and potential mutual tariffs from competing nations – can prove to be a more painful pill that swallows than less goods at a higher customs rate to deal with in the past.
While President Trump himself used SMOOT-HAWLEY as justification of his tariff action, Wharton's Gomes said Luck Two instances are so far removed that it is a “ridiculous comparison”.
At the simplest level explained: “I would say a) [The 1930s] There was a recession that started, b) we had a gold standard and monetary policy was just about protecting the gold standard, which led to a huge deflation. “”
Transatlantic examples
The tariffs can be useful bargaining chips in the negotiating sense and – depending on who you ask – can bring some economic benefits.
University of Cambridge Professor Macroeconomics Michael Kitson He admits that he is in a minority of his peers when he emphasizes that the general tariff deposited by the United Kingdom in 1932 could bring some blessings to the economy – for example, pointing out the increase in production between 1932 and 1937.
10% of the obligation imposed by the United Kingdom, however, was far from the extensive changes of President Trump and Kitson emphasizes the conditions that allowed any contribution to the British economy are not present in America 2025.
This “special condition” included a high unemployment rate (US unemployment rate is currently and stable 4.1%), tariffs were deposited on competitive imports that are not free imports, such as raw materials and food (President Trump has already announced a 25% increase in aluminum and steel) and the exchange rate was not allowed to appreciate the level to delete tariff profits.
What is, especially in that there was no great potential for other countries (for example, the EU could now add from US exports that were unable to add from US exports of US service).
“Most of these conditions are now not subject to the US,” Kitson said LuckIt says that not only these conditions are not met, there are compound factors that push the US economy even further away from tariff success.
“What we now have is much more complicated supplier chains than we had at the age of 20. Century, which makes the impact of tariffs more complicated and more likely to be more likely to be negative,” he added.
Is there any merit in the theory of hard resetting?
Tanking S&P 500 Tanking 5% with the permission of Trump's announcement about the tariff is exactly the opposite of what many analysts expected when he first won an oval office.
It led some to speculate whether President Trump's intention was to create “hard resetting” with a slowdown in the economy to reduce inflation, lower interest rates and weakened the dollar – everything created a more stable economic landscape for republicans to rule.
Initially, many analysts rejected theory as a plot. Yet Kevin Ford, FX and Makro Strategist in Convero come to the idea: “I'm starting to see justification, at least partially, especially when I see Trump and its cabinet, who focus on the debt market.
“In three of the last four addresses, Trump's state focused on the stock market and often praised his powerful performance. However, he and his team recently fell silent on this front, instead turned their attention to a ten -year return.
Ford added that the acceptance of “disruption” compared to the promises of the golden era under Trump is other indicators that say “I don't think the administration is focused on the bear market or sharp economic recession.
Of course, the economic trajectory of J-Curve (a short drop before dramatic gain) would be to cool the activity without provoking a recession, but Ford added: “Their act of balance of politics is complex-some of them could even call it gambling-especially if you take immigration, DOGE and removal measures from other countries.
“He's a big question mark, but as time continues, the idea of engineering the economic regrouping of J-Curve no longer seems to be so attractive.”
Forgotten service sector
In most and back above tariffs is a glaring omission: The motivation for this event is based on the deficiencies of the goods and ignores the huge American service sector that represents two thirds of the economic activity of the nation.
In fact a white house Information certificate The tariff confirmation does not mention the service sector once – despite being The largest exporter of services in the world.
The impact that these tariffs will have on this industry cannot be ignored, said ebehi iyohaProfessor of business administration at Harvard Business School.
Iyoha is to release a working document at the impact of tariffs on small and medium -sized enterprises In cooperation with business networks, which is carried out before 2 April. The respondents were not aware of the tariffs that have already been located on similar to China, Canada and Mexico, added Iyoha, perhaps understandable to the founders and entrepreneurs without a large team behind them.
However, Iyoha said that the impact of foreign policy on services in the field of services cannot be overlooked and Luck“Some of the companies in our sample are companies that are in the tourism industry. If we are thinking about downstream the effects of these tariffs on people's willingness, for example, to visit the United States, to spend these small businesses in these sectors in which these small businesses are?
“There has been a lot of concentration [in] Rhetoric of business policy about goods, but really does not think: “As the US benefits in global traded services and how they have [small businesses] It benefits from this integration of global trade. It's something I think is constantly missing in the interview. ”
This story was originally listed on Fortune.com
