Trump tariffs mark a significant shift towards economic nationalism, discarding decades of accepted wisdom on free trade and globalization to boost the economy with potentially unintended consequences, including recession and an acceleration in American decline
On April 2, 2025, United States (US) President Donald Trump announced the most sweeping global tariff increase since the 1930 Smoot-Hawley Tariff Act, which triggered a trade war and deepened the Great Depression. He set a baseline 10% tariff on all imported goods from over 180 countries, tumbling global stock markets. Additional tariffs were imposed based on trade imbalances of individual countries, including allies such as the European Union and Japan. China was slapped with a 54% tariff.
Trump addressed Americans as he announced the new tariffs, calling April 2, 2025, Liberation Day waiting for a long time. He said the day will forever be remembered as the one American industry was reborn, its destiny was reclaimed, and they began to make the country wealthy again. ‘We are going to make it wealthy, good and wealthy.’
Trump claimed nations near and far, both friend and foe alike, looted, pillaged, raped and plundered the US for decades. He said American steel, auto workers, farmers, and skilled craftsmen, some of whom were in the audience, suffered gravely. Trump said they watched in anguish as foreigners stole their jobs, ransacked their factories, and tore apart their once-beautiful American dream.
For supporters, Trump tariffs are intended to boost the US economy despite warnings about the adverse consequences of the move globally, including recession and a shift in alliances with countries seeking new trading partners.
Unpredictable Outcomes
The outcomes of tariffs cannot be predicted as they depend on multiple factors such as interest rates and currency exchange rates globally. What is certain is that they are risky, and the reason why the US successfully oversaw global free trade, or neoliberalism, and globalization for the last 50 years. Trump is now reverting to economic nationalism, discarding the accepted wisdom of five decades. Trump tariffs are seen as a way of coping with a declining economy without admitting so.
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Trump tariffs were unlikely to end well, particularly against the backdrop of an economically and politically weakening America, as reflected in the debacle in Ukraine, where the US reversed its policy to freeze weapons supplies, and suspended intelligence sharing, offering decisive advantage to the long-time adversary Russia. The US has been in decline for a decade or so. The GDP, or the total annual output of goods and services for a country, of the US, for instance, and its major allies in the Group of Seven, is about 28% of global output, while it is about 35% for China and its bigger economic bloc, BRICS.
End To US Imperial Dominance?
Economist Richard Wolff has argued that Trump and his allies were ‘striking out at other people’ in desperation and denial of an end to US imperial dominance in response to the growing economic fortunes of the rest of the world and the associated decline in American hegemony. He warned it would not work, underlining that Trump tariffs were based on an ahistorical notion of being a victim of free trade, even though the US, particularly people at the top like Trump, have been among its biggest beneficiaries.
Wolff, a University of Massachusetts Amherst economics emeritus professor and the author of Understanding Capitalism and The Sickness Is the System, called blaming the foreigners cheap shots that a real president would not do when the American economy is in trouble and the American empire is in decline. In an interview with Amy Goodman of Democracy Now!, Wolff said every country thinking about building a railroad or expanding its health programme would send people to Washington or London for help. He added they still do, but when they are done, they send the same team to Beijing, New Delhi, and São Paulo, and often get a better deal.
The Denial
Wolff underlined that the world was changing and the US could cope, but as with alcoholism, one has to admit to a problem before being in a position to solve it. He said the US does not yet want to face what this all adds up to. Wolff emphasized the US was in denial and instead was striking out at other people in a sad way of handling a decline.
The US empire has been declining after a great 20th century. Wolff said there was an acknowledgment of difficulties, but they are projected as somebody else’s fault, and sought to be solved by punishing them. The world was unlikely to sit by. The US does not have the power it had in the 20th century. It is not in the position it seems to imagine. Hence, the Republican Party, which was known as the anti-tax party for a century, under Trump’s leadership imposed the massive tax, thinking the US has problems, and a slap at the rest of the world will help solve them. Wolff warned that it would not work as the US does not have the power to do it anymore.
Bringing Jobs Back
Trump’s supporters argue the tariffs were intended to bring jobs back. United Auto Workers president Shawn Fain, who backed Trump tariffs, said they were not the total solution but a tool to get companies to do the right thing, bring jobs back, and invest in American workers. He underlined that over 90,000 manufacturing facilities have left the US, and the 65 plants in the Big Three, or the largest automobile manufacturers, General Motors, Ford Motor Company, and Stellantis, have closed in the last 20-plus years.
Former Greek finance minister Yanis Varoufakis wrote that critics mistakenly believe that Trump thinks that his tariffs will reduce America’s trade deficit on their own. He argued Trump knows they will not, and their utility comes from their capacity to shock foreign central bankers into reducing domestic interest rates. The Euro, Yen, and the Renminbi consequently soften relative to the dollar, cancelling out the price hikes of goods imported into the US, and leaving the prices American consumers pay unaffected. Varoufakis argued the tariffed countries will be effectively paying for Trump tariffs.
Reality Check
The tariffs were, however, expected to encourage domestic producers to raise prices with little competition from abroad, boosting inflation and hurting the working class. Retaliatory measures could mean loss of export markets and fewer jobs. When the prices go up, people would buy less, stressing an already troubled American economy.
The tariffs have also been linked to $4 trillion in tax cuts. In his first presidency, Trump announced the tax cut in December 2017. The tax cut law expires in 2025. If that expiration is allowed, corporations and the rich, Trump’s base and donors, who were the beneficiaries in 2017, face a tax increase. Trump is unlikely to do that and allow taxes to increase again.
The new tariffs appear to be also designed to continue spending without letting those taxes increase and borrowing. Trump is seen to be the president who does not want to keep borrowing, partly because the creditors in the rest of the world are unlikely to continue with business as usual. The hope is to save the expenditures, and the problem is sought to be solved at the cost of the working class by firing them without notice and a plan in the name of efficiency.
Tariffs make everything coming in from abroad expensive, meaning people buy less, shrinking their standard of living. American companies can, as usual, take advantage of the tariff by raising their prices and hurting the working class. With Trump tariffs, the US is getting contained, seven decades after American diplomat George F Kennan formulated the containment policy post-Second World War as the strategy for fighting the Cold War (1947–1989) with the Soviet Union. Kennan advocated defending industrial power centres in Western Europe and Japan against Soviet expansion.
Trump tariffs potentially mean the economic isolation of the US if the announcement of China, Japan, and South Korea, which have histories of animosity, of a coordinated response and plans to increase trading ties is anything to go by. It means a double-whammy of sorts for the US that was already isolating itself politically with its unqualified backing of Israel’s ethnic cleansing in Gaza.
Sameer Arshad Khatlani is a journalist and the author of the Penguin Random House book The Other Side of the Divide
