Pars Today – The President of the United States has initiated a trade war with America’s economic partners and rivals for various reasons. However, some media outlets and analysts do not rule out the possibility of Donald Trump backing away from his tariff policies. Since entering the White House in 2016, Trump has consistently pursued the imposition of trade tariffs on goods imported into the U.S. as a cornerstone of his economic policy.
Although during his first term, despite some reservations and caution, Trump was highly insistent on enforcing tariff policies, he failed to achieve the stated goals of his economic agenda due to his loss in the 2020 election and the earlier challenges posed by the COVID-19 crisis. Now, upon his return to the White House, Trump has pursued this policy much more seriously and explicitly from the very first hour.
The key question now is: What consequences will Trump’s tariffs—or his trade war—with commercial rivals, long-standing allies, and various countries, big and small, have for global trade and the U.S. economy? And how will it impact the situation of other nations within the current international system?
The dilemma of retaliation or tolerance in response to U.S. tariff policy
Most countries affected by U.S. trade tariffs have announced they will take retaliatory measures and impose counter-tariffs on American goods. China, as the U.S.’s primary economic rival and the world’s second-largest economic power, immediately responded to Trump’s actions by imposing 34% tariffs on American goods.
French President Emmanuel Macron called for a halt to investments in the U.S., and the European Union is currently consulting and assessing the situation to potentially impose trade tariffs against the U.S. Other countries, such as Japan, South Korea, Mexico, and India, have reacted more cautiously, stating they will not take reciprocal action for the time being.
Consequences of the trade war for the international economy
Following the imposition of U.S. government trade tariffs, the investment bank J.P. Morgan raised its forecast for the likelihood of a global recession by the end of 2025 from 40% to 60%. Kristalina Georgieva, Managing Director of the International Monetary Fund, stated, “The U.S. tariffs clearly represent a significant risk to the global outlook at a time of slowing growth.”
The trade war is also causing a reduction in global trade volume, disrupting commercial partnerships worldwide, and ultimately slowing global economic growth. A decline in global trade leads to reduced production and, consequently, a drop in energy demand.
Trump’s reasons for persisting with tariff policies
The Trump administration believes that imposing tariffs will encourage companies to increase investments in the U.S., as it would allow them to sell more products in America’s large consumer market. However, many experts argue that the lack of investment security might make investors hesitant.
For instance, they are concerned that the next U.S. administration could reverse these tariffs. On the other hand, conflicting voices are emerging from within Trump’s own administration. While Trump fully supports the imposition of trade tariffs, he has also spoken of tax exemptions and described the use of tariffs as a pressure tool and leverage in negotiations.
MG/ME
