Jamie Dettmer is the opinion editor at POLITICO Europe.
“America is lost!” lamented King George III as he assessed the ramifications of the American Revolution. Will today’s leader in Washington reflect similarly on the loss of global influence?
Unlikely. U.S. President Donald Trump is not known for admitting mistakes or showing remorse.
As stock markets in the U.S. plummeted after Trump announced sweeping tariffs on 180 countries, he confidently asserted that the economy would rebound and flourish, proclaiming a return to America’s glory days. Vice President JD Vance countered, stating critics were focusing too much on short-term impacts: “We’re poised for a booming stock market for a long time because we’re reinvesting in the United States of America,” he declared.
However, the heavy-handed approach of Trump, based on questionable calculations and flawed economic reasoning, is reminiscent of King George’s oppressive trade policies towards the American colonies — at least the British monarch had the excuse of bouts of insanity.
Trump’s declaration of economic independence and his adoption of 19th-century protectionism effectively shut the door on global partnerships. This may lead to the unintended consequence of the international community gradually establishing a new trade order, one that America has shaped, benefited from, and now seems to have forsaken.
These shifts will also have geopolitical ramifications. Many nations are already looking into new bilateral trade agreements or evaluating ways to enhance regional trading blocs. U.S. allies like Japan and South Korea are actively seeking to strengthen trade relations with China and are advancing discussions on their trilateral free trade agreement. Furthermore, members of the Association of Southeast Asian Nations and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership are accelerating their integration efforts.
In the interim, Trump’s self-proclaimed “Liberation Day” is likely to deliver a harsh economic jolt — a shock that could very well trigger a global recession.
Kristalina Georgieva, Director of the International Monetary Fund, has merely cautioned that Trump’s tariffs pose a significant risk to the global economy. Meanwhile, analysts at JPMorgan have escalated their assessment of a global recession to 60 percent — an increase from a previous estimate of 40 percent — warning clients that the repercussions could be exacerbated by retaliatory measures, supply chain disruptions, and a shock to market sentiment.
Much will depend on how nations react to Trump’s tariffs. Retaliatory actions could provoke countermeasures from Trump, leading to a tit-for-tat escalation that could further deteriorate the global economic situation. Their responses will also depend on the clarity of Trump’s ultimate objectives, which remain ambiguous.
The chaos and disarray are reflective of the overall strategy, showcasing a divide in the administration’s collective mindset.
Are the tariffs merely a bargaining tactic to extract favorable deals for the U.S.? Eric Trump asserts that’s precisely what his father intends: “I wouldn’t want to be the last country negotiating a trade deal with @realDonaldTrump. The first to negotiate will win — the last will undoubtedly lose. I’ve seen this scenario play out my whole life,” he tweeted.
Trump himself has indicated a willingness to engage in trade negotiations, expressing readiness to discuss duties with other countries if they present attractive offers.
This stance contradicts White House aides who insist that these stringent tariffs are not negotiable. Trump’s chief trade advisor, Peter Navarro, made it clear to CNBC that the tariffs are non-negotiable: “This is not a negotiation … This is a national emergency,” he stated.
The economic calculations behind these tariffs are also puzzling, relying on a questionable formula that involves taking the U.S. trade deficit in goods with a specific country, dividing it by total imports from that country, and halving the result.
So, are the tariffs meant to reverse U.S. trade deficits as suggested by the formula? There seems to be a prevailing belief within the administration that U.S. trade deficits are detrimental, the fault of unscrupulous trading partners taking advantage. However, they overlook the notion that these deficits may stem from an excessively strong dollar, unsustainable government spending, and a consumer culture that prioritizes spending over saving and investing.
With this context, it’s unlikely that tariffs alone can reverse the trade deficits.
Could the tariffs serve a significant role in Trump’s broader tax policy, enabling him to extend the income tax cuts introduced in 2017 that require renewal this year? Or do they aim to revert to a 19th-century model where the government was primarily funded through tariff revenues? “We were at our wealthiest from 1870 to 1913. That’s when we were a tariff-based economy,” Trump remarked in February — a sentiment he echoed in the Rose Garden during his economic independence announcement this week.
However, relying on tariffs from other nations to alleviate domestic U.S. taxes is impractical. Tariffs alone will not suffice to finance the current U.S. government — even a significantly reduced version. Moreover, tariffs are far less predictable than income taxes.
Could these tariffs simply be intended to incentivize the return of manufacturing jobs, as Trump claimed on Wednesday, asserting that “jobs and factories will come roaring back into our country”? This sentiment was also echoed by Vance in his remarks this week — though he was skeptical in 2017, warning that protectionist policies would likely do little to revive factories and jobs due to automation and technological advancements.
Ultimately, the various justifications provided by Trump and his senior aides for this aggressive strategy — ranging from tax reductions to deficit elimination and reshoring — will complicate how trading partners decide to navigate these new policies.
Should they endure the situation or retaliate? Regardless of their choices, both allies and adversaries will likely begin constructing a new global trade framework — one that America may find far less favorable than the one it has recently dismantled.
