Trump's Tariff Tactics A Recipe for Economic Disaster?

Trump's Tariff Tactics A Recipe for Economic Disaster?

When Donald Trump launched his first trade war as President in 2016, many economists predicted a devastating impact on the US economy. While the tariffs did cause some economic disruption, they ultimately had little effect on inflation or growth. However, this time around, Trump's tariff tactics pose a much higher risk to the economy.

A New Chapter

In his second term, Trump has grander ambitions for his trade war strategy. He plans to impose 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on China. This is not just a replay of the same old tactics; this time, Trump's targeting of America's closest trading partners threatens growth and pushes up prices in the United States.

The Consequences

When Trump imposed his first set of tariffs, he carefully targeted industrial products to minimize the impact on consumers. This time around, his tariffs are across the board, with no exceptions for essential goods like toys. The result will be higher prices for American consumers and a bigger hit to company profits.

Global Trade War Risks

Trump's tariff tactics also risk sparking a global trade war. By imposing tariffs on imports from Mexico, Canada, China, and beyond, he creates an environment where other countries feel compelled to retaliate with their own tariffs. This could lead to a spiraling cycle of tit-for-tat tariffs that damages the global economy.

The Economic Context

The economic backdrop for Trump's second-term tariff tactics is also more challenging than it was in his first term. Inflation has surged in recent years, and interest rates are still elevated. If Trump's tariffs rekindle inflationary pressures, it could convince the Federal Reserve to keep interest rates high, reducing real growth and mortgage borrowing rates.

Conclusion

Trump's tariff tactics may have worked in his first term, but they carry much higher economic risks this time around. The consequences of his actions will be felt far beyond Washington D.C., with American consumers and businesses bearing the brunt of the impact. As Jacobs Ogadi aptly noted outside a Harris Teeter supermarket, If it goes up 25%, it's not the government, it's not the Mexican people paying for it... Who pays for it? Us.

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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.