President Donald Trump announced America’s "Liberation Day" on April 2, levying new tariffs against more than 180 countries and territories. Since then, Americans have been liberated from a good chunk of their retirement savings, with more than $6 trillion in stock value being wiped out in just two days.
Also, since that announcement, 75 nations have offered to renegotiate tariffs against America if our recent actions are undone. Now, the ball is in Trump’s court to make a deal.
If he doesn't, Trump’s newest round of tariffs will undermine America’s interests abroad and push our allies closer to our enemies. The window for him to avoid disastrous consequences from foreign policy is quickly approaching.
Trump's tariffs are undermining America's place in the world
The rest of the world will not abandon globalization just because the United States has. Countries that have had their economies decimated by Trump’s policies will not be eager to regain our good graces.
In all likelihood, our voluntary destruction of the world economy will only push our allies further toward our enemies. Nobody will be happier about these policies than China and Russia. The second Trump presidency gives them the biggest opportunity to expand their sphere of influence since the end of World War II.
There's an argument to be made for targeted tariffs on Chinese goods. The 145% tariffs that the Trump administration has now slapped on our great rival are much higher than what makes sense, but disincentivizing investment in China has value for America.
However, that's not what we are doing. Rather than tariff China and encourage manufacturing elsewhere, we are punishing even the countries that have long provided alternatives to Chinese manufacturing.
Countries like Vietnam, where 30% of the economy depends on exports to the United States, are going to have their economies crumbled if exporting to America becomes infeasible. The alternative is that they find other nations to manufacture goods for; in all likelihood, those nations will not be our allies.
For decades, we have encouraged companies to manufacture in Vietnam to give them an alternative to China. If Vietnamese goods become unaffordable, the incentive for companies to avoid Chinese manufacturing will also disappear.
Chinese President Xi Jinping has already expressed his desire to improve influence over Vietnam in light of American tariffs, and with nowhere else to go, Vietnam may be forced to cozy up to the Chinese Communist Party.
Fears that the United States will lose its status as the “world’s reserve currency” that have existed for years will only be exacerbated by this. Even if we reverse course, neither our allies nor our trading partners have any reason to trust that Trump’s whims won’t shift back in favor of tariffs. Trump's volatility is undermining the United States’ role in the world.
The off-ramp is quickly approaching if Trump wants deal
Trump and his allies have been oscillating between the explanation that tariffs will create jobs and the explanation that these are a negotiating tool to promote free trade.
There are people in Trump’s camp, including Elon Musk, who disagree wildly on the end goal of these tariffs.
It's not just our enemies that we are entering this trade war with. Europe has already announced its own possible retaliatory tariffs. America is willingly vacating its role in the world of trade, and the chance to backtrack is quickly disappearing.
Trump has the opportunity to avoid much of the long-term consequences of his actions, but the window is closing for him to do so.
Should Trump want to save face in light of the disastrous market response, all he needs to do is drop tariffs on countries that make concessions to the United States. Making the tariffs truly reciprocal and opening up free trade with partners willing to drop barriers against us could actually deliver a political good from this.
This action wouldn’t fix Trump’s broken logic surrounding trade deficits and their harm, but it would give him an easy political out to save face before the economy crashes in its entirety. This should allow for the tariffs to deliver a political win for Republicans and to stroke Trump’s “art of the deal” ego.
However, if countries see that there truly is no negotiating out of these heightened tariffs, it's only a matter of time before they begin orienting their economies away from America, and aside from Europe, the only other places to go are to our enemies.
The reality is that Trump’s stubbornness likely doesn’t allow for this. He has been convinced of the effectiveness of tariffs for decades; he isn’t likely to let economists and the entire economy crumbling stop him.
America is quickly approaching the off-ramp, and Trump would be wise to take it. America, and in turn the entire world, will suffer if he chooses to prolong the madness of tariffs.
No comments:
Post a Comment