"Trump's Tariff Tactics Higher Economic Risks in His Second Term

Trump's Tariff Tactics Higher Economic Risks in His Second Term

As President Donald Trump enters his second term, concerns are growing about the potential impact of his tariff policies on the US economy. While some economists predicted chaos and economic instability when he launched a trade war in his first term, the effects were ultimately manageable. However, with Trump's grander ambitions for tariffs this time around, the stakes are higher than ever.

The Risks of Tariffs

Trump's plan to impose tariffs of 25% on goods from Mexico and Canada, and 10% on China, would not only threaten economic growth but also push up prices in the United States. Importers would face significant costs, which they would likely pass along to consumers through higher prices.

The Unpredictability of Trump's Tariffs

Trump himself has acknowledged the potential risks of his tariffs, stating in a social media post that WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!) This unpredictability creates uncertainty for businesses and investors alike, making it difficult to plan for the future.

The Impact on Businesses

Companies like Basic Fun, which imports 90% of its toys from China, are already preparing for the fallout by raising prices and absorbing a hit to profits. According to the CEO, the company is forecasting significant losses as a result of the tariffs.

The Risks of Retaliation

If other countries retaliate against Trump's tariffs with their own, he will likely respond with additional tariffs, risking a spiraling trade war. This scenario was warned against by Eswar Prasad, professor of trade policy at Cornell University, who stated that it would be setting off a tit-for-tat game that could escalate and cause real economic harm.

The Economic Backdrop

Inflation has become a growing concern in recent years. Prices surged following the end of COVID-19 lockdowns, and while inflation has since come down from its four-decade high, it remains above the Federal Reserve's 2% target.

Conclusion

As Trump navigates the complex landscape of tariffs and trade policy, businesses, investors, and US trading partners are left waiting to see what he will do next. Will he re-impose tariffs on Canada and Mexico after 30 days? Will he pursue the European Union with new tariffs? Or will he abandon his threat of a universal tariff?

The uncertainty surrounding Trump's tariff policies creates significant economic risks that cannot be ignored.

Keywords Trump, tariffs, trade war, economic risks, inflation, Federal Reserve

Edward Lance Arellano Lorilla

CEO / Co-Founder

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