Summary
Global leaders criticized Trump’s new tariffs, which range from 10% to 49%, warning of trade wars and economic fallout.
The UK and Italy urged negotiation, while Brazil passed a reciprocity bill. China and South Korea vowed countermeasures.
Australia and New Zealand rejected Trump’s logic, citing existing trade deals and low tariffs. Norfolk Island was baffled by a 29% duty despite having no exports.
Financial markets dropped, oil and bitcoin sank, and leaders warned of inflation. Analysts say Trump risks fracturing global trade with little to gain economically.
U.S. factories in most cases cannot produce goods that are competitive in a global market. Our labor costs are too high.
This idea that we can revive American traditional manufacturing of basic goods is a complete fantasy. The factories in Vietnam aren’t going anywhere, because they will still be selling to the other 95% of the globe outside the U.S. Even if factories are stood up in the U.S., they will be constrained to producing higher-priced goods exclusively for the domestic market, with all the attendant inflationary impacts from start-up costs and higher labor costs.
Meanwhile, retaliatory tariffs from other countries will cause the collapse of U.S. exports. We’ll lose markets for the sectors where the U.S. is still competitive, like agriculture, advanced manufacturing, and even services.
Trump’s approach is similar to the failed development strategy of import substitution industrialization, except in this case he thinks it will cause the U.S. to reindustrialize. In any case, it will fail for the same reasons ISI failed in Latin America.