Unmasking Trump's Tariff Game: The Real Agenda Behind the Global Trade War
- Penned by: Vince Riggs
- Duration: 5 Min
U.S. President Trump's Tariff Strategy: Unveiling the Math Behind the Duties Imposed - U.S. President Donald Trump's Strategic Justification for Imposing Tariffs
It's no secret that Donald Trump's latest move - slapping hefty tariffs on numerous nations, including penguin-infested islands - has left many shaking their heads, muttering "nutty," "disaster," and "disaster in the making." But delving deeper into the mind of the American president, we must question if these hasty judgments truly grasp the intricate machinations at play.
Donald Trump's sudden announcement of global import tariffs may seem puzzling, but scratch the surface, and you'll uncover a far more complex, multi-layered strategy. Let's decipher the reasoning behind the Trump administration's seemingly illogical tactics.
Trump's tariffs, seemingly aimed at balancing global trade relations, are indeed focused on making foreign products less appealing to American consumers and corporations. The "Buy American" slogan isn't just about national pride - it's also an attempt to encourage foreign companies to set up shop on US soil, thereby "Bringing back jobs."
The Unfortunate Victims: US Firms and Consumers
Basing policy on a distorted trade balance view is naïve and misleading, as Trump's policy overlooks key factors like services. The dominance of US tech giants has made countries interdependent, spurred by a mature, symbiotic economic system that has elevated the USA to the wealthiest nation on the planet.
Moreover, thembattleship's collateral damage goes well beyond foreign nations. Tariffs disproportionately harm US companies and consumers more than foreign counterparts, a grim reality that became clear in the markets this week, as global indices sank to their knees. For instance, Germany's DAX slumped a whopping 3%, while the S&P 500 and tech-heavy Nasdaq plummeted close to 5% - with industry giants like Boeing, Nike, and Apple bearing the brunt of investors' anxiety.
To put it concretely, the sheer complexity of manufacturing an aircraft like Boeing's or an iPhone means that their supply chains cannot be easily uprooted or resurrected. As a result, customers will have to shoulder the cost of higher-priced products in the coming years. Boeing's share price crashed by over 10%, while Apple and Nike faced losses of over 11% - a chilling indication of investors' expectations.
What's Trump's True Intention - And Why?
At long last, let's address the elephant in the room: If Trump's tariffs are intended to revitalize manufacturing jobs and make the U.S. a gold mine, how can he pursue both these objectives at the same time?
There are at least three convincing reasons for Trump's disputed agenda:
- Trade Bargaining Chips: Trump intends to utilize tariffs as negotiating tools to bully other countries. His tactic of pursuing his own interests without regard for diplomatic norms was apparent during his early days in office, most notably with Ukraine. Trump might well use tariffs to pressure countries into meeting his demands, such as buying American weapons in exchange for lower tariffs or vice versa. This tactic can be limiting, but Trump is banking on it for now.
- A Cheaper Dollar and Lower Interest Rates: Trump's primary goal may not be to fix trade deficits but to devalue the dollar and lower interest rates on US Treasury bonds. Multiple times, Trump has expressed his preference for a cheaper dollar, while Treasury Secretary Steven Mnuchin recently suggested this as a consequence of the ongoing trade war. By causing worldwide economic uncertainty, Trump can weaken the dollar and ease the burden of US debt service.
- Revamping the Global Financial System: Trump's trusted associates have reportedly been working on a "Mar-a-Lago Accord" - a plan to force foreign creditors to accept extended, zero-coupon bonds. While this may sound paradoxical, it reflects the essence of Trump's tactics. Trump's tariffs would serve as leveraging tools to coerce other nations to accept the new bond terms, with the threat of withdrawing military support if they show resistance. This scenario, while uncertain, could result in a default by the world's biggest debtor, with grave consequences for the global financial system, banks, insurers, and asset managers. Perhaps unsurprisingly, the extent of Trump's involvement in these ideas remains unclear.
Europe: Don't Be Trump's Pawn
So, how should the European Union respond to Trump's global trade war?
- Remain Calm - Let the Hurting Sink In: While Europe's knee-jerk reactions in Brussels and Paris this week might suggest otherwise, the best course of action is to allow the initial impact of the tariffs to hit home in the US before retaliating. Wait and watch is not inaction or submission - it's smart strategy. The focus should be on understanding the true cost Trump's actions inflict on US companies and consumers, with the aim of countering strikes at the perfect time.
- Form Alliances: Poland, Japan, India, Latin America, and even China can be potential allies in this trade battle. A unified front against Trump's machinations increases the chances of a fairer, more balanced world economy.
- Strengthen Your Position: The US's bullying tactics have always exploited interdependencies and mutual benefits. As such, Europe must work towards creating a strong, independent economy. This involves shedding reliance on the US in terms of military alliances, weapons systems, and financial networks - areas where Trump has shown willingness to use leverage.
If Trump's trade war teaches us anything, it's that this president will seize any opportunity to twist interdependencies and cooperative endeavors to his advantage. Europe must be ready for this - anticipating and adapting to Trump's every move.
- The community policy must assess the potential implications of Donald Trump's tariffs on employment, as the tariffs could increase uncertainty in the market and lead to job losses in US firms that rely on importing goods or exporting to countries affected by the tariffs.
- The employment policy should consider the long-term effects of the tariffs on US companies, as industries like aviation and technology have complex supply chains that cannot be easily disrupted, potentially leading to higher prices for consumers due to the increased cost of sourcing materials or components.
- In light of the uncertainty caused by Trump's tariffs, it would be prudent for the employment policy to look into potential measures to assist US firms and their employees during this economic turmoil, as well as implementing strategies to encourage foreign companies to invest in the US and create jobs domestically. Additionally, the community policy should work towards forming alliances with other countries affected by the tariffs to present a unified front against protectionist policies.
