How Trump cost America the world

 

How Trump cost America the world

 

Friend and foe alike will start piecing together a different global trade order that the U.S. might like a lot less than the one it trashed.

 

Unpacked

April 5, 2025 4:00 am CET

By Jamie Dettmer

Jamie Dettmer is opinion editor at POLITICO Europe.

https://www.politico.eu/article/tariffs-stock-markets-how-us-donald-trump-cost-america-the-world/

 

“America is lost!” a distressed King George III had noted, reviewing the causes and consequences of the American Revolution. But will today’s would-be monarch in Washington one day similarly regret having lost the world?

 

Unlikely. U.S. President Donald Trump isn’t a man to admit mistakes — nor is he one to express regret.

 

And as U.S. stock markets plunged following his announcement of sweeping tariffs on 180 countries this week, Trump beamed that all would  soon rebound and boom. America’s heading to glory days. Vice President JD Vance, meanwhile, complained critics were taking far too short-term a view: “We’re going to have a booming stock market for a long time because we’re reinvesting in the United States of America,” he said.

 

But the heavy-handedness Trump displayed, all based on cockamamie calculations and deeply flawed economics, is as maddening as King George’s restrictive trade practices toward the American colonies — and at least the British monarch had the mitigating excuse of episodes of clinical madness.

 

Trump’s declaration of economic independence and embrace of 19th-century protectionism amounts to slamming the door on the rest of the world — and it will likely have the unintended consequence of the rest of the world deciding, albeit painfully and slowly, to remake a new global trade order to replace the one America shaped, prospered from and has now abandoned.

 

It will also have geopolitical consequences, as many countries are already exploring new bilateral trade deals or examining how to expand regional trading blocs. U.S. allies Japan and South Korea, for example, are seeking to bolster trade ties with China and are talking about accelerating negotiations on their trilateral free trade agreement. And the members of the Association of Southeast Asian Nations and Comprehensive and Progressive Agreement for Trans-Pacific Partnership are now looking to integrate faster.

 

In the meantime, for Americans and much of the world, Trump’s self-styled “Liberation Day” is bound to deliver a severe economic shock — one more likely than not to trigger a global recession.

 

International  Monetary Fund Director Kristalina Georgieva has so far restricted herself to warning that Trump’s tariffs represent “a significant risk” to the global economy. But analysts at JPMorgan have raised their risk assessment of a global recession to 60 percent — up from a previous prediction of 40 percent — warning customers that the impact could be “magnified by retaliation, supply chain disruptions, and a sentiment shock.”

 

Of course, much will depend on how countries respond to Trump’s tariffs. Retaliation, for example, could invite countermeasures from Trump, prompting a tit-for-tat spiral that worsens the global economic outlook. But their responses will also hinge upon what Trump’s endgame really is — and that just isn’t clear.

 

The disjointedness and chaos are inherent in the overall goal behind the strategy, reflecting, in part, a split in the administration’s collective thinking.

 

Are the tariffs a bargaining ploy to wring out deals that are favorable for the U.S.? According to Trump’s son Eric, that’s what his father is after: “I wouldn’t want to be the last country that tries to negotiate a trade deal with @realDonaldTrump. The first to negotiate will win — the last will absolutely lose. I have seen this movie my entire life,” he posted.

 

And Trump himself indicated he’s open to trade negotiations, saying on Thursday that he’s ready for talks with other countries about duties, if they offer something phenomenal.

 

However, this contradicts White House aides, who say the draconian tariffs aren’t a bargaining tactic. Trump’s top trade aide Peter Navarro, for instance, told CNBC the tariffs aren’t up for negotiation: “This is not a negotiation … This is a national emergency,” he said.

 

The calculations themselves are also nonsensical, based on a dubious formula arrived at by taking the trade deficit for the U.S. in goods with a particular country, dividing that by the total imports from that country, and then dividing the resulting number by two.

 

So, are the tariffs just a way of reversing U.S. trade deficits, which the formula would suggest? There appears to be consensus within the administration that U.S. trade deficits can only be a bad thing — the fault of malign trading partners taking advantage. However, no thought is given to the counterargument that the deficits are consequences of an overly strong dollar, unsustainable government expenditure and Americans choosing to save, invest little and spend a lot.

 

Bearing that in mind, tariffs won’t necessarily be able to reverse the deficits.

 

Then does that mean they’re meant to play a major role in Trump’s overall tax policy, allowing him to extend the income tax cuts he introduced in 2017 that need to be renewed this year? Or to possibly turn the clock back to the 19th century, when government was largely funded by tariff revenue? “We were at our richest from 1870 to 1913. That’s when we were a tariff country,” Trump said in February — a point he echoed in the Rose Garden when announcing his declaration of economic independence this week.

 

But taxing the world to reduce domestic U.S. taxes isn’t going to work. Tariffs won’t be anywhere near enough to finance the current U.S. government — even a much reduced one. Also, they’re far less predictable than income taxes.

 

So, could the tariffs simply be meant to incentivize the re-shoring of manufacturing as Trump promised on Wednesday, claiming “jobs and factories will come roaring back into our country”? It’s a point Vance also emphasized in his remarks this week — though he certainly didn’t think so in 2017, when he warned protectionist policies would do little to bring factories and jobs back “because of automation and because of new technological change.”

 

In the end, all the reasons Trump and his top aides have cited to explain the highly aggressive strategy — from cutting taxes to reducing deficits and re-shoring — will make it harder for trading partners to plot what to do.

 

Should they grin and bear it or strike back? Whatever they decide, friend and foe alike will likely start piecing together a different global trade order — one that America might like a lot less than the one it just trashed.