Trump’s Economic Vision: Is Global Growth at Risk of Spoiling His Success?

WASHINGTON (AP) — President Trump is making big moves in the global economy. Many countries, including those in the European Union, Japan, and Vietnam, are agreeing to pay higher tariffs just to sell their goods in the U.S. This shift reflects Trump’s long-standing belief in protectionism—a strategy that aims to shield American industries from international competition.

Recently, the U.S. and the 27-member EU announced a trade agreement. Under this deal, the EU will accept a 15% tariff on most American goods. This development has calmed fears of a trade war and includes commitments from the EU to buy $750 billion in U.S. energy products and invest $600 billion in America by 2028.

Trump celebrated the agreement, calling it “the biggest trade deal.” However, the details are vague. Most successful trade agreements require extensive negotiations. According to experts, unclear terms may lead to challenges down the line.

Financial markets, which initially reacted negatively to Trump’s tariff policies, are adjusting. Tariffs are now at levels not seen in about 90 years. This increase is bringing in billions in new revenue to the U.S. Treasury, potentially offsetting some recent tax cuts. Yet, economists warn that higher tariffs could lead to increased prices for American consumers and hurt economic efficiency. This concerns many, especially those in the middle and lower classes.

Daniel Hornung, a former economic advisor in the Biden administration, pointed out that while some see this as a moment of relief, the new trade environment may actually slow growth and increase recession risks. He compared it to altering the baseline economic conditions without clear long-term benefits.

The agreement with the EU followed a similar deal with Japan, both countries accepting a 15% tariff and promising significant investments in the U.S. The urgency seems to be pushing more countries to agree to these terms before Trump raises tariffs further.

Historically, Trump has argued that America missed opportunities to leverage its economic power. He believes that imposing tariffs forces other nations to pay for access to the vast U.S. market. Some close to him believe that his negotiation tactics are proving effective, challenging the warnings from many economists about potential downturns.

However, the clarity around these agreements is still murky. Different parties are interpreting investment terms in various ways, leading to uncertainty about what the agreements actually entail.

Moreover, Trump is facing legal challenges over his authority to impose these tariffs. Some states and businesses argue that he exceeded his powers by declaring national emergencies. Recently, a federal court upheld the tariffs for now, but the legal battle may continue.

As for China, negotiations are ongoing but fraught with tension. China is using its own strategies, including threats of retaliatory tariffs and withholding essential materials, to resist Trump’s demands. Future discussions are set to take place in Stockholm, Sweden.

Despite the apparent gains in trade agreements, many experts remain skeptical. Research from Morgan Stanley suggests that while growth may continue, inflation could rise sharply as a result of tariffs. The U.S. tariffs on cars from Europe and Japan have decreased but are still significant and may eventually affect car prices in U.S. dealerships.

Economists also warn about the “slow-burn” issues resulting from the uncertainty of varying tariffs. American companies, which have historically enjoyed low tariff rates, now face challenges in adjusting their supply chains to meet these new demands. This adjustment could weigh down on the economy in the long run.

Mark Zandi, an economist at Moody’s Analytics, highlighted that the effective tariff rate has surged from around 2.5% at the start of the year to 17.5%. He cautioned against premature celebration, suggesting that the economic impact of these tariffs will become clearer over time.

In this complex trade landscape, it remains to be seen how Trump’s strategies will play out for American consumers and businesses. The balance between protectionism and free trade will continue to shape the economic future.

For further insights on these trades and their implications, you can explore studies from the Peterson Institute for International Economics and other trusted sources.

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