Trump’s Tariffs: A Turning Point for Global Free Trade in a Post-War Era?

President Trump has put a lot of tariffs into play. The goal? To protect American industries, generate revenue, and use them as leverage in trade talks.

So far, he has imposed tariffs on Chinese imports, proposed a 25% tariff on steel and aluminum, and threatened similar charges on imports from Canada and Mexico. If these measures go through, average tariffs would reach their highest levels since the 1940s, signaling a major shift in global trade dynamics.

Since World War II, tariffs have generally been viewed negatively. Economists believe they lead to increased prices for consumers and reduced choices. Plus, they often prompt retaliatory actions from other countries. Is this change a step backward?

To discuss the impact of Trump’s trade policies, I brought together two experts: Meredith Crowley, a professor of Economics at Cambridge, and Jeff Ferry, former Chief Economist at the Coalition for a Prosperous America.

Tariff Perspectives

Dharshini David: Why does Trump find tariffs so appealing?

Jeff Ferry: Trump views tariffs as a tool to revive manufacturing in America. In 2024, the US had a massive trade deficit, with the rest of the world profiting from selling to the US market. He believes this situation gives America leverage in negotiations.

Meredith Crowley: Trump’s concern likely stems from the decline of manufacturing jobs over the past four decades. He wants to use tariffs to encourage job growth in the manufacturing sector.

Possible Retaliation

Dharshini David: Other countries are hinting at retaliatory tariffs. How might this affect Trump’s economic goals?

Jeff Ferry: No doubt, a careful strategy combining tariffs and investments could spur US economic growth. However, history shows that short-term tariffs could hurt more than help.

Shifting Trade Norms

Dharshini David: Are we witnessing a backlash against globalization?

Jeff Ferry: Yes, we’re moving away from post-WWII trade policies designed to support global growth. As China rises in prominence, America’s reliance on it becomes a concern. We need a new approach.

Meredith Crowley: During the 1980s, job restrictions led to challenges, including higher prices for consumers. While tariffs can drive American industry, better solutions, such as direct support for domestic production, could be more effective.

Consumer Impact

Dharshini David: Will Americans feel the consequences of higher prices?

Meredith Crowley: In previous tariff rounds, importers absorbed much of the costs initially. However, as people adjust to ongoing tariffs, manufacturers gradually raise prices.

Lower-income consumers, who spend more on goods like clothing, feel the impact the hardest as tariffs become a burden on them.

The Risk of Trade Wars

Dharshini David: Are we in danger of a global trade war?

Jeff Ferry: The trade war has been ongoing since China joined the global trade scene in 2001. What people fear isn’t the war itself, but losing their market access.

Equality and Globalization

Dharshini David: Could these trade barriers create inequality?

Meredith Crowley: Yes, limiting trade opens the door for monopolistic practices, which allow companies to hike prices without competition. A trade war could have negative spillovers worldwide, especially in developing regions.

Jeff Ferry: This isn’t just a downside. Ultimately, it’s about evolving the global trade system to promote growth and security for the US and allies alike.

This discussion sheds light on how tariffs and trade policies not only impact the US economy but also set the stage for future international relations. It’s important to consider both potential benefits and drawbacks as we move forward in this rapidly changing economic environment.