Trump’s ‘Liberation Day’ will endanger the global economy
This could be a “liberation day” for the United States, as the White House has declared. We’ll see what happens.
Whether they call it American independence or an attempt to isolate the world from the global trading system, Trump’s tariffs are an attempt to transform a badly broken economic model. And they’re something that will affect all of us in the world.
Trump’s announcement was full of some pretty bad, misleading language. Full of insults. The rest of the world has robbed, raped, stolen, and pillaged America. If this statement had come from any other American president, it would have been extremely painful. But Trump is a president who has no sense of shame. He imposed tariffs on the rest of the world. He closed the door to everyone. In January, Trump said in his inaugural address, “Instead of taxing our citizens to make other countries rich, we will tax and levy taxes on foreign countries to make our citizens rich.” Trump’s new tariffs made those words a reality.
Even to Trump’s opponents, these tariffs will now appear as the most important evidence yet that Trump has American workers on his agenda. Joe Biden has embarked on a massive tax-and-borrow-and-spend program to defeat the post-Covid economic uncertainty. Trump has imposed tariffs to achieve the same goal.
There was speculation that Trump’s tariff announcement was just a ploy, that he would soon withdraw or adjust it. But now it seems that it will go a long way. For Trump, tariffs are not a bargaining chip or a negotiating tactic, but a new wave of revenue and the fulfillment of his “Make in America” promise.
Markets and governments were nervous before Trump’s announcement. The uncertainty has not abated since. UK Prime Minister Keir Starmer has consistently advocated a “calm realist” approach. But Trump’s behavior is exactly the opposite. Whether we like it or not, we are now in a trade war. As the leader of the world’s most powerful economy, Trump is enjoying it because he thinks the US will win this war. However, when the wheels start to touch the road, things may not look so benign. Inevitably, the current tensions will subside, whether among the public or in the markets. This will happen when the inevitable upward pressure on consumers is passed on, when inflation and business costs start to rise, when real wages stagnate or investment stagnates, and the US economy enters the Trump-recession experience.
The kind of tariffs that Trump has planned will take time to have a real impact on the economy. It is true that these tariffs could start being levied very soon and other countries could quickly impose retaliatory tariffs in return.
Let’s try to look at it a little differently. It also seems that Trump is acting more rationally than reality. Because the international economic model is broken. He is reacting to a crisis that arose from real things like the global recession. He is dealing with a crisis that arose from the combined effects of the banking sector crisis of 2008-09 and the Covid pandemic of 2020. This was not a rumor or a fantasy. It was not just that, it is still happening. It is not just the US that has felt this, but the rest of the world, including Europe and Britain. The common root of the burden of today’s economy is excessive debt and indebtedness. This was the cause of the banking sector crash in 2008. An attempt was made to prevent this disaster by initially spending huge amounts of government money through quantitative easing (a monetary policy in which the central bank buys open market securities to achieve the desired result). But before the crash, that money was more on debt than on production or goods.
As a result, all kinds of measures were taken that would be impossible to imagine in normal times. The tax burden was reduced in the US, austerity policies were adopted in Britain, retirement benefits were cut in France. These measures ultimately provoked so-called populist reactions. For example, Trump won the election in 2016, Brexit happened in the UK, and the yellow vest movement in France. But before any country could solve this crisis, the Covid pandemic arrived. There was a recession all around, the stock market crashed, and inflation soared.
Trump’s response to the ongoing problems took the form of tariffs. But whether they would work in the United States is uncertain. These tariffs could trigger a recession. As a result, there could be a dilemma between tax and spending policies in the European Union, Canada, Japan, Britain, and elsewhere. They could also widen the gap between the United States and its allies. While Trump talks about liberation, Germany’s new Chancellor Friedrich Matthias talks about “independence from the United States.”
