How Trump’s "tariff war" could harm US itself
In a dramatic escalation of trade tensions, US President Donald Trump has imposed an across-the-board 10% tariff on goods from China, threatened a 25% tariff on imports from Canada and Mexico, and vowed similar measures against the European Union.
His stated objective is to secure deals to halt the flow of drugs and unauthorized immigration into the United States, suggesting that tariffs will now be an instrument of border security.
Read more about how Trump’s "tariff war" could impact the global economy and US prosperity in the column by Carla Norrlöf, Professor of Political Science at the University of Toronto – Tariffs that hurt the United States: risks of Trump’s blackmail against neighbouring countries.
The author argues that trade barriers on this scale could destabilize global markets, drive up prices for American consumers, and potentially drag the US – and the world – into recession.
"In betting that the potential economic fallout is worth the gains in border security, Trump is gambling with America’s long-term influence and prosperity," warns Norrlöf.
Canada, Mexico, and China are major trade partners – the first, second, and third largest export markets for the US – they can inflict pain on the US by retaliating with their own tariffs.
Punishing these key partners could backfire by pushing them toward alternative suppliers and weakening America’s long-term economic influence.
She reminds us that America’s national security strategy relies on maintaining close economic relations with allies, and creating economic distance from its rivals. A trade war makes this much more difficult to achieve.
To be sure, Mexico and Canada’s swift concessions demonstrates that leveraging economic dependencies can achieve policy goals without significant self-inflicted harm in the short term, and Trump might try the same tactic against other countries that rely on the US market.
Additionally, beyond his stated goals, imposing tariffs on major trade partners allows him to say that he is protecting US industries, encouraging domestic production, and potentially creating jobs and reducing the trade deficit – a recurring theme of his campaign.
f foreign exporters adjust their export prices downward to accommodate lower US demand, the US could well reap terms-of-trade gains by benefiting from lower import prices relative to export prices.
But this optimal tariff argument ignores the substantial risks that Trump is taking
Norrlöf warns that Further escalations could disrupt global supply chains, negatively impact the US and global economy, and harm political relationships.
"In the future, more countries will have even stronger reasons to try to reduce their economic and political reliance on the US. Ultimately, the economic and political fallout from Trump’s policies could undermine the very goals they aim to achieve, leading to greater costs than benefits for the US," she notes.
Ultimately, she concludes, the economic and political fallout from Trump’s policies could undermine their very objectives–bringing more losses than benefits to America.