Trump’s tariff wall was never about fairness or reciprocity

• Blanket tariffs on all goods imports confirm he is committed to ‘liberating’ the US from the very system that made it prosperous

By Ian Bremmer

Globalisation helped make the United States the most prosperous country in history, but many Americans apparently did not feel (or appreciate) it, so they voted to “liberate” themselves from the system that America built. US President Donald Trump is now delivering for them, and the consequences are reverberating around the world.

“Now it’s our turn to prosper,” Trump proclaimed on April 2, when he announced sweeping tariffs, ranging from 10 to 50 per cent, on almost every US trading partner (plus a few uninhabited territories). China was hit with a 34 per cent tariff on top of the 20 per cent duties Trump had already levied in February and March. Japan, the European Union and South Korea will face tariffs of 24, 20 and 25 per cent, respectively.

Trump’s “Liberation Day” heralds America’s definitive turn against globalisation. Virtually overnight, the effective tariff rate on US imports will rise to over 22 per cent, higher even than the infamous 1930 Smoot-Hawley tariffs, which are widely blamed for starting a global trade war and deepening the Great Depression.

Trump describes the new tariffs as “reciprocal”, but the White House’s formula does not consider other countries’ tariff rates and non-tariff barriers against US goods. Instead, the calculation assumes that bilateral goods trade deficits are necessarily and entirely “unfair”, representing “the sum of all cheating”.

This is, of course, a gross misunderstanding of how trade works. There is nothing inherently bad or unsustainable about bilateral trade deficits. Surpluses and deficits can reflect many factors unrelated to trade policy – from population size, wealth, saving rates and resource endowments to idiosyncratic preferences for certain products over others.

In Trump’s world view, however, if other countries spend less to buy goods from America than America spends to buy goods from them, that is evidence of the US getting “ripped off”. Thus, his new tariffs punish poor countries like Lesotho and Madagascar for being unable to spend as much on Tesla Cybertrucks and Boeing jets as wealthier Americans spend on their diamonds and vanilla.

The core reason these countries have trade deficits with America is not because they discriminate against US exports but because they are poor. Trump’s punitive tariffs will only worsen their poverty.

Trump’s tariff wall was never about fairness or reciprocity, nor are the tariffs intended to force other countries to lower trade barriers and ultimately boost free trade. Otherwise, countries with balanced trade and even bilateral deficits with the US would not be facing a 10 per cent duty. Trump’s tariffs also entirely ignore the growing trade in services, where the US is the world’s export powerhouse, with an overall surplus of US$293 billion in 2024.

Trump is hoping the tariffs will incentivise consumers to “buy American” and companies to build factories in the US. But tariffs could succeed at reshoring manufacturing only over the long term, and only by making imported goods and inputs permanently more expensive for US households and companies. In fact, broad-based tariffs are far likelier to raise prices, reduce product variety and hurt American businesses.

There’s no sugarcoating it: Trump’s embrace of autarky is an act of deliberate self-harm – the most destructive economic own goal in recent history, akin to Brexit but on a global scale. The tariffs will force Americans to pay more for their goods, eroding their purchasing power. Businesses’ costs will increase, reducing their productivity and driving up prices further. As consumer spending, business investment and exports fall, unemployment will rise and the economy may tip into recession – especially if other countries introduce retaliatory tariffs.

China vows to take ‘countermeasures’

Facing a substantial hit to their economies, many of America’s trade partners will be tempted to respond in kind. But recognising that trade wars are a losing game, most will try to cut deals to limit the damage. The notable exceptions are the two economies with the leverage to hit back: China, which already announced retaliatory measures including a 34 per cent tariff on all US goods, and the EU, which has a package of countermeasures ready. Unfortunately, while Trump may be willing to strike some bargains to score wins, he continues to signal he is intent on breaking America’s decades-long dependence on imports.

Many imagine he will back off once the political fallout from his gambit grows intolerable. After all, unilaterally decreeing the largest tax hike in modern US history is a risky bet, and polls already show very few Americans favour the move. As tariffs increase prices and slow the economy, many voters will blame Trump and Republicans will suffer in the 2026 midterm elections.

But Trump doesn’t have to run for office again. He cares about his legacy, and he is convinced of his ability to cement it.

Equally, as the recent Signalgate scandal confirmed, Trump has surrounded himself with people whose main qualification is unconditional loyalty. With policymaking feedback loops broken and long-standing checks on executive power being removed, Trump may well double down on his failed policies rather than pivot.

Facing the prospect of sustained American protectionism, most countries will intensify their efforts to lessen their economic reliance on the US and deepen their ties with the rest of the world. Even strategic US allies in Europe and Asia will be pushed to start hedging towards China, however reluctantly. American interests and influence will be damaged accordingly.

The historian Arnold Toynbee famously observed that civilisations die by suicide, not murder. Trump’s “liberation” from the system that America created is the kind of self-destruction Toynbee warned about.

Source: https://www.scmp.com/opinion/world-opinion/article/3305788/trumps-tariff-wall-was-never-about-fairness-or-reciprocity?module=perpetual_scroll_0&pgtype=article

(Ian Bremmer, founder and president of Eurasia Group and GZERO Media, is a member of the Executive Committee of the UN High-level Advisory Body on Artificial Intelligence.)