How western countries can deliver a painful response to Trump’s promised tariffs
Through a flurry of executive orders, US President Donald Trump has spent his first weeks in office trying to dismantle the international order that the United States helped create after World War II.
Trump is also determined to upend the international trade system.
Read more about how Western nations can effectively counter this move in a column by Gabriel Zucman, professor at the Paris School of Economics – Trump’s Achilles’ heel: how the EU and Canada could hit back in the "tariff war."
The author of the column reminds us that Less than two weeks after taking office, he announced steep tariffs: 25% on imports from Canada and Mexico, and 10% on imports from China (on top of the levies already in place).
Gabriel Zucman adds that the US has also announced announced a 25% tariff on all steel and aluminum imports, and hinted at additional levies on automobiles, pharmaceuticals, and computer chips. Europe, too, could soon find itself in the crosshairs.
"The consequences of the trade war Trump seems determined to stoke could be severe," warns the professor at the Paris School of Economics.
According to him, supply chains today are deeply integrated across borders, accounting for around 50% of intra-regional trade.
In many cases, components cross borders multiple times before final assembly, so paying a 25% tariff each time an input crosses a border would quickly ratchet up costs.
"America’s Achilles’ heel is its highly internationalized oligarchy: a small group of ultra-wealthy individuals whose fortunes depend on access to global markets. This vulnerability gives foreign governments influence. The most effective countermeasure is simple: tariffs for oligarchs," the author argues.
He suggests that countries should tie market access for foreign multinationals and billionaires to fair taxation. As soon as Trump follows through with tariffs on Canada and Mexico, those countries should retaliate by taxing US oligarchs. In other words, if Tesla wants to sell cars in Canada and Mexico, Elon Musk – Tesla’s primary shareholder – should be required to pay taxes in those jurisdictions.
Unlike traditional tariffs, Zucman explains, an oligarch tax targets those who benefit the most from globalization: billionaires and the corporations they control.It shifts the economic conflict from a battle between countries – which fuels nationalist tensions and economic retaliation – to one between consumers and oligarchs.
"Trump’s return to the White House carries alarming implications. But it also presents an opportunity. This is a moment to rethink international economic relations, calmly but radically. The best response is a new global economic framework that neutralizes tax competition, fights inequality, and protects our planet," argues the professor.
He adds that if it’s a trade war Trump wants, consumers in Mexico, Canada, Europe, and beyond should unite to ensure that Musk and his fellow oligarchs feel the cost.