Trump's new protectionist era

Copyright © HT Digital Streams Limit all rights reserved. The Editors, the Wall Street Journal 4 min Read 03 Apr 2025, 06:18 am Ist President Donald Trump has a graph on Wednesday while making remarks on reciprocal rates in the White House. (Brendan Smialowski/Agence France-Presses/Getty Images) Summary The bloating of the world trading system has the consequences that the president does not advertise. President Trump unveiled his new Liberation Day tariffs on Wednesday, and they are still a big step towards a new old era of trade protectionism. As we assume that the policy sticks – and we hope it is not – the effort amounts to an effort to rework the US economy and the world trade system. All details are not clear as we write it, but the rates of Mr. Trump only seems ‘reciprocal’. First, he strikes every nation in the world with a 10% base line tariff to sell in the US market. For those he calls ‘bad actors’, he adds the country’s tariff rate to US goods, plus an arbitrary estimate of the cost of his ‘foreign exchange manipulation’ and non-tariff barriers. He then takes the total number and applies half of it into rates on the country’s exports to the US. He hits China with a 34% tariff, but our Japanese friends will pay almost as much at 24%. The European Union is beaten by 20%, India by 24%. We will further assess the details in the coming days, but for today, some of the consequences that are already arising in this new protectionist era are considered: • New economic risks and uncertainty. The overall economic impact of Mr. Trump’s tariffs are unconscious – not least because we don’t know how countries will react. If countries try to negotiate with the US to lower rates, the damage could be milder. But if the reaction is widespread retaliation, the result may be that world trade and slower growth, recession or worse. There will certainly be higher costs for US consumers and businesses. Rates are taxes, and if you tax something, you get less of it. Motor prices will rise by thousands of dollars, including those made in America. Mr. Trump makes a deliberate decision to transfer wealth from consumers to businesses and workers protected from competition behind high tariff walls. Over time, it will mean the gradual erosion of American competitiveness. Rates that invite blunt competition monopoly profits while reducing the need to innovate. This is the story of the American steel and automotive industry in the 1950s and 1960s before global competition exposed their shortcomings. • Damage to US exports. One long -time US trading goal was to expand markets for US goods and services. Administrations of both parties reviewed trade transactions, bilateral and multilateral, to do so. Apollo Global Management says 41% of the revenue of S&P 500 firms comes from abroad. Trump’s unilateral rates blow up those arrangements and invite revenge. US exports will suffer directly from retaliation rates. And they will suffer indirectly as other countries trade that give preferential treatment to non-American firms. Think of the soybean Bonanza of Brazil after Mr. Trump’s rates in China in its first term. • A larger swamp in Washington. Rates set up costs that businesses want to avoid. So it will be a windfall for Beltway Lobbyists, as companies and countries seek exemptions from this or that border tax. Mr. Trump says there will be no tariff releases. But look at how the promise disappears as politicians, including Mr. Trump, regarding exemptions as a way to utilize the contributions of the campaign of the business. Liberation Day is another yacht day for the swamp. • The end of US economic leadership. Britain played this role through the First World War, but it was too weak by war to continue. The US only entered into the leadership mantle after depression and World War II. US leadership and the decision to spread free trade has produced seven decades of mostly rising wealth at home and abroad. The US part of the global GDP has been stable for about 25%for decades, even if he rises and falls. The era is ending now, as Mr. Trump takes on a more branding vision of trade and US own interest. The result is likely to be every nation for itself, as countries try to carve world markets that are not based on market efficiency but to political advantage. In the worst case, the world trade system can be committed to beggars-u-neighbor policy policies in the 1930s. The cost in lost US influence will be considerable. Mr. Trump thinks that lure the US market and US military force is enough to bend countries to its will. But gentle power is also important, and that includes trusting the Word of America as a reliable ally and trading partner. Mr. Trump breaks the confidence as he punishes allies and blows up the USMCA which he negotiated in his first term. • An important opportunity for China. The great irony of Mr. Trump’s rates are that he justifies them as a diplomatic instrument against China. In his first term, Mr. Trump abandoned the trade transaction in Asia-Pacific that excluded China. Beijing has since signed his own agreement with many of these countries. Trump’s new tariff attack gives China another opening to use its big market for US allies. South Korea and Japan are the first targets, but Europe is on China’s list. Nodder trade ties with China, amid doubt about access to the US market, these countries will make less likely to join the US to set up export control on technology to China or to ban the next Huawei. This is far from a comprehensive list, but we offer it as food for reflection, as Mr. Trump builds his new protectionist world. The world economy reform has major consequences, and it cannot all contribute to what Mr. Trump as a new ‘golden era’ advertises. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Genitstate #Donald Trump #Tariff Hike Mint Special