Cogito Ergo Non Serviam
Trump Tariffs Will Tank Global Economy
The United States will levy reciprocal tariffs against other nations that have tariffs on US goods. This is going to adversely affect the volume of global trade, and in so doing, it will undermine every economy in the world. It will spark stagflation, a period of relatively high inflation with relatively high unemployment. The purpose is to create trade barriers that allow domestic industries to tool up and grab market share. While this can work in theory, known as the infant industry argument, the time lag between the price hikes and the development of domestic production will result in a recession, if not worse.
When government increases taxes, as with these tariffs, it forces business and consumers to spend less because they have to pay the taxes. So they have less to spend. If a product costs $1, five of them cost $5. Put a 20% tariff on them, and the price rises to $1.20, so $5 will only buy four of them. That happens immediately. It will happen tomorrow. The economy will adapt but that will not happen immediately, not tomorrow.
The adaptation is what Mr. Trump wants. What could be better than US-made products on US shelves for US consumers? Products made anywhere that are of the highest quality at the lowest possible price would be. That is being abandoned for the silly idea that a $40,000 US-made car is better than a $50,000 car made elsewhere simply because of the passport of the people who turned the screws on the assembly line. Yet Mr. Trump and his chauvinists will argue that a Ford Taurus is as good (better even) than an Audi or Toyota simply because it is American made. That is plainly not so. But that presumes there is enough Ford production capacity to meet demand. That is almost certainly not true.
The roll-out needs to be smooth to minimize disruptions, but it is not going to be. Forbes magazine reported, "2.5 million. That’s how many individual tariff rates would be required in a good-by-good, country-by-country reciprocal tariff plan, UBS economists led by Jonathan Pingle wrote in a note to clients, making it appear unlikely at this point the Trump administration will be able to turn around such a policy by next week."
The idiotic thing about these reciprocal tariffs is that comparative advantage means some countries make certain items while others do not. Iceland, for example, does not export oranges. Florida does not export woolen goods. There is a logical trade between the two with Iceland getting oranges and Florida getting wool products. Neither produces much of what the other exports.
That allows for specialization and economies of scale in both Iceland and the US. What it does not allow for are reciprocal tariffs that make any sense. If Iceland has a tariff on Florida oranges, as part of policy to encourage trade with Morocco which also produces oranges, Florida cannot slap a tariff on Icelandic oranges. No such product to tax. It can put a tariff on woolen goods, but that is not reciprocal. Yet Mr. Trump wants to do this for 2.5 million products. To implement this correctly, months if not years of preparation are needed. Mr. Trump seems to be flying by the seat of his pants here, as usual. None of the ground work has been done. None of this is going to go smoothly except by accident.
Meanwhile, other nations will retaliate, something that Mr. Trump does not seem to realize. If there is retaliation will he escalate things further, making world trade even smaller? Or will he negotiate a resolution? The smart money is on the former.
When this is all finished, when there are tariffs all over the world for no reason other than a desperate attempt by the administration to change the terms of trade, the world will be poorer than it needed to be. Moreover, it will be difficult to reduce the tariffs in one move they way they were imposed. It took the post-war world years to negotiate free-trade deals, and there is no reason to believe it will be any easier next time.
The global economy is about to take severe damage. None of it is necessary.
© Copyright 2025 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
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