Economic policy with punitive tariffs: Why is Trump doing this?

Economic policy with punitive tariffs: Why is Trump doing this?

“Make America Great Again” (MAGA for short) has been Trump’s campaign motto for many years – and can be seen on many baseball caps. He promises the people of the USA an industrial rebirth. As much as possible everything Americans buy should be made in the USA, and as little as possible abroad – as was the case from the 1950s to the early 1980s.

This is supposed to create “jobs, jobs, jobs”. So that domestic industry can achieve this, Trump wants to seal off the US economy if necessary with high tariffs and thus protect it from competition from abroad. But can this work?

US consumers are addicted to cheap imports, especially from China

Consumers’ private consumption is even more important in the USA than it is here. The share of gross domestic product and economic growth is particularly large. Consumption plays the decisive role there when it comes to the economy.

Because the USA has been consuming more than it produces and exports for decades, it accepts high trade deficits, especially with China, but also with Germany. The deficit with China alone was around $500 billion last year. German companies delivered goods, especially technology such as cars and machines, for around 200 billion dollars. Bavarian companies are at the forefront.

Trump’s import tariffs would significantly increase inflation in the USA

Many of these vast quantities of goods cannot be manufactured in the USA, at least not immediately, and probably only at a higher price later. If Trump now imposes high tariffs on these imported goods, prices for American companies and consumers would increase accordingly. Extreme inflation could be the result.

Economic experts are already warning about this and also about the risk of a recession due to higher prices. Both would be bad for all of the USA’s trading partners, both the tariff barriers and a possible crash of the American economy due to high inflation.

Is everything just a threat to a “deal” with the EU?

Because a recession is not a good option for Trump either, there is hope that his advisors will prevent the worst and, for example, find a trade deal with the EU. In addition to tariffs on steel and aluminum, possible negotiating points would be the controversial agricultural exports from the USA or the eternal dispute over government subsidies for competitors Boeing and Airbus.

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