"The Challenges of Trump's Tariff Tactics A Higher Risk Profile in His Second Term

Here is a revised version of the blog post

The Challenges of Trump's Tariff Tactics A Higher Risk Profile in His Second Term

As President Donald Trump enters his second term, his tariff tactics have taken on a more aggressive tone. The initial trade war sparked controversy among mainstream economists who advocate for free trade. However, the impact on the US economy during his first term was relatively minimal, and inflation remained under control.

A Shift in Strategy

This time around, Trump's plans to impose tariffs on goods from Mexico and Canada, as well as China, pose a higher risk profile for the US economy. The tariffs would not only threaten growth but also push up prices in the United States, contradicting his campaign pledge to eliminate inflation.

The Consequences

The tariffs would be paid by US importers, who would then attempt to pass along the increased costs to consumers through higher prices. This could have a significant impact on businesses like Basic Fun, a toy company that imports 90% of its products from China. CEO Jay Foreman expects to raise prices and absorb a hit to profits when the tariffs take effect.

The Broad Targeting

In his first term, Trump's trade team focused on industrial products, avoiding consumer goods. This time around, the tariffs are across the board, leaving no industry untouched. Even suppliers in countries that were previously exempt from tariffs could find themselves in Trump's crosshairs.

A Potential Trade War

The insertion of a retaliation clause in the tariff orders signed by Trump on Saturday means that if other countries retaliate against his tariffs with tariffs of their own, he will respond with still more tariffs. This risks setting off a spiraling trade war of tit-for-tat tariffs and counter-tariffs.

A Different Economic Landscape

The biggest difference between now and then is the economic backdrop Trump must contend with this time. Inflation has surged in recent years, and prices remain above the Federal Reserve's 2% target. Trump's tariffs could rekindle the inflationary trend and convince the Fed to cancel or postpone interest rate cuts, pushing up mortgage and loan borrowing rates.

The Unpredictability of Trump

For now, businesses, investors, and US trading partners are waiting to see what the unpredictable Trump will do next. Will he reimpose the tariffs on Canada and Mexico after 30 days? Will he really go after the EU? Or make good on his threat of a universal tariff?

The Impact on Consumers

Outside a Harris Teeter supermarket near downtown Raleigh, North Carolina, Jacobs Ogadi had in his shopping bag an avocado, which almost certainly came from Mexico. The 62-year-old mechanic said it doesn't take a rocket scientist to know that Trump's tariffs run counter to his promises to rein in inflation. If it goes up 25%, it's not the government, it's not the Mexican people paying for it, he said. Who pays for it? Us.

The Bottom Line

In conclusion, Trump's tariff tactics carry higher economic risks than during his first term. The impact on businesses and consumers could be significant, and the unpredictable nature of Trump's actions makes it difficult to predict what will happen next. As investors and policymakers, it is essential to stay informed and adapt to the changing landscape.

Keywords Tariffs, trade war, inflation, economic risks, Trump administration

Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.