In a dramatic departure from U.S. trade policy, President Donald Trump has enacted bold, extensive new tariffs on just about all imported goods—at least 10% tariff at minimum—thereby igniting fears of global economic disruption.
Unlike the earlier “build the wall” rhetoric, this new “wall” is earmarked for economic ends; jobs and manufacturing would be kept within the ‘U.S. fence’. But as far as the broader populace is concerned, fallout from this portends to be both far-reaching and confused.
Back in 1913?
Underlying this are quite possibly his economic ideals, a nostalgia for American greatness—one that indicates to an era without federal income tax in which tariffs were the main source of revenue for the U.S. government. While effective in the past for encouraging the initial stages of industrialization, experts now advise against that kind of high protectionism, which could very well result in the U.S becoming isolated from global markets it helped establish.
A Blow to Globalization
It is a significant departure from the decades-long journey that globalization and free trade had traveled under the banner of US promotion. Close in on these headers as tariffs that would penalize surplus trade countries-“cheaters”-and the rules of international trade would now be rewritten.
Paradoxically and much more surprisingly, the idea that underpins a lot of the centuries-long progress made by the global economy, comparative advantage would be brushed aside. The theory, as developed by British economist David Ricardo, asserts that countries prosper when they pour their resources into the production of the goods at which they are the best and freely trade with others.
An Equation for Conflict
A very simple, controversial formula justifies these tariffs: the greater the country’s trade surplus with the USA, the higher tariff it faces. Critics of this argument argue that its overly simple mathematical formula oversimplified for a field that treats real trade barriers and economic complexities as subjects of study. This policy pursuant added little countries, emerging economies and even uninhabitable islands.
Also Read: Trump Imposes 17% Tariff on Philippine Goods
The China Shock and Political Payback
Much of this trade strategy of Donald Trump comes from what is called “the China shock”-meaning the transformation economic blow after China had entered to WTO in 2001. After this time, the USA had cheap imports and booming profits but millions of jobs in manufacturing disappeared, especially in the Rust Belt area.
Economist David Autor found that the job losses probably have been building resentment that would naturally become grounds for Trump’s emergence. Now, the President proposes tariffs as a solution-to bring back manufacturing factories and jobs.
Winners, Losers and Global Effects
According to the White House, these new policies will encourage companies, which include union workers to relocate production back to the U.S. In contrast, economists argue that the larger picture is grim: inflation will rise, consumer goods will become more expensive and Wall Street would already be anticipating a probable recession.
Meanwhile, America’s trading partners-some in Europe, most in Canada-would consider retaliation.
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