Trump’s big, not so beautiful, tariff wall

Globalization helped make the United States the most prosperous nation in history. But lots of Americans didn’t feel that way, and accordingly voted to “liberate” themselves from it last November. Donald Trump is now delivering for them – and the consequences will reverberate across the globe.

“Now it is our turn to prosper,” President Trump proclaimed on April 2 in the Rose Garden as he announced sweeping “reciprocal” tariffs ranging from 10 percent to 50 percent on almost every US trading partner (plus a few uninhabited territories). China, labeled one of the “worst offenders,” was hit with a 34 percent tariff on top of the 20 percent duties Trump had already levied in February and March, bringing its base rate to 54 percent. Japan, the European Union and South Korea, to name a few of the “cheaters” and “scavengers” who Trump said had “looted,” “raped,” “plundered” and “pillaged” America, saw 25 percent, 20 percent and 15 percent tariffs imposed, respectively. Even countries with goods surpluses with the United States were slapped with a 10 percent across-the-board levy.

“Liberation Day,” as Trump called it, heralded not the end of US-led globalization, which had been adrift for many years already, but America’s definitive turn against globalization. Virtually overnight, the effective tariff rate on US imports will rise to over 22 percent, going from one of the world’s lowest to by far the highest of any major economy. This is a level not seen since the turn of the previous century – higher even than the infamous 1930 Smoot-Hawley tariffs, widely credited with starting a global trade war and deepening the Great Depression.

Trump has long described the new tariffs as “reciprocal,” saying that the United States is only doing onto other countries as they do to the US. But the formula the administration ended up using to compute its so-called reciprocal tariffs doesn’t look at the tariff rates and non-trade barriers other countries impose on US goods at all. Instead, the calculation assumes that bilateral goods trade deficits are necessarily and entirely “unfair,” treating America’s deficit with every country as “the sum of all cheating” and seeking to eliminate it instead of actual trade barriers.

This, of course, is a gross misunderstanding of how trade works. There’s no linear correlation between a country’s protectionism and its bilateral trade balances. Trade surpluses and deficits can stem from all sorts of factors unrelated to trade policy – from population size, wealth, saving rates and resource endowments to idiosyncratic preferences for certain products over others. As such, deficits are not inherently bad or unsustainable.

Yet in Trump’s worldview, what matters is whether countries spend more to buy goods from America than America spends to buy goods from them. If the answer is no, that’s evidence the US is getting “ripped off.” His new tariffs accordingly punish the world’s smallest, poorest nations like Lesotho and Madagascar with crippling duties for the crime of not being able to spend as much on Tesla Cybertrucks and Boeing jets as 340 million fantastically wealthier Americans do on their diamonds and vanilla. The core reason these countries have trade deficits with America is not because they discriminate against US exports but because they’re poor – something Trump’s punitive tariffs will make worse.

Trump’s tariffs also completely (and conveniently) ignore the growing trade in services, where the United States is the world’s export powerhouse to the tune of over $1 trillion a year and runs persistent surpluses with much of the world – $295 billion in 2024. If other countries applied Trump’s same “fairness” standard to the US services trade surplus, the “reciprocal” tariffs levied on Americans would average 13 percent. This makes clear that Trump’s tariff wall was never about fairness or reciprocity. Nor are the tariffs intended to lower trade barriers and ultimately lead to freer trade, as some Trump allies insist. Otherwise, countries with balanced trade and even bilateral deficits with the United States, in addition to those with zero tariffs and non-tariff barriers, would not be facing a 10 percent duty, too.

The conclusion is inescapable: The president is committed to walling America off from the world in order to eliminate all bilateral trade deficits and use the tariff revenue to fund his expensive tax cuts and spending plans. As Vice President JD Vance explained, he “believes in economic self-sufficiency.”

Trump is hoping that along the way, the tariffs will incentivize consumers to buy American and companies to build factories in the US. But tariffs could only succeed at reshoring manufacturing in the long term – and only by making imports more expensive for US households and producers (which use foreign inputs in manufacturing). History, however, shows that broad-based tariffs are far likelier to raise prices, reduce product variety and hurt American businesses. It’s instructive that if import substitution was expected to succeed, tariffs couldn’t be counted on to raise the trillions in revenue needed to pay for tax cuts and spending hikes the administration is readying to pass.

There’s no sugarcoating it: Trump’s embrace of autarchy is an act of deliberate self-harm – the most destructive economic own goal in recent history, akin to what the British did with Brexit but on a global scale. The tariffs will force average Americans to pay more for their goods, eroding their purchasing power. Businesses will see their costs increase, too, reducing their productivity and further increasing prices. As sticker shock depresses consumer spending, business investment and US exports, unemployment will rise, and the economy may tip into recession – especially if other countries retaliate with tariffs of their own. And that’s before you even get to the high and persistent uncertainty about both the path and the end-state of policy inherent to the Trump administration, which will continue to depress long-term investment and growth whether or not tariffs are moderated.

Facing a substantial hit to their economies, many of America’s trade partners will be tempted to respond in kind. Most will also recognize that doing so is a losing game, risking an escalatory spiral and exacerbating the economic self-harm. They will accordingly play defense and try to cut deals with Trump to limit the damage and attempt to extract tariff reductions. (The notable exceptions are the two economies with the leverage to hit back: China, which already announced retaliatory measures including 34 percent tariffs on all US goods, and the EU, which has a package of countermeasures ready.)

Alas, while nations and firms willing to ask for exemptions and carve-outs can find some room for dealmaking with the world’s most transactional president, Trump has signaled that he is truly intent to break America’s decades-long dependence on imports and raising revenue. Negotiating most tariffs away would fatally undermine this strategy.

Many imagine that Trump will back off once the political fallout from his gambit grows intolerable. After all, launching the largest tax hike in modern US history is a risky bet that the pain will be short-lived and Americans will swallow it in exchange for long-term gains. Polls already show that few Americans are willing to take that gamble. As tariffs increase prices and slow the economy, many voters will blame Trump for making them worse off, and Republicans will suffer a thumping in the 2026 midterm elections.

But Trump is a lame duck – he doesn’t have to run for office again. What he cares about is his legacy, and he is maximally convinced of his ability to cement it. “Bad news stories? Doesn’t give a f---. He’s going to do what he’s going to do,” as a White House official put it. And as Signalgate revealed, the leader of the free world is not being exposed to the best advice and intelligence – because his advisers have been selected for loyalty over all else. In an environment where feedback loops are broken and long-standing checks and guardrails on executive power are being eroded, it’s possible Trump will double down on his failed policies rather than pivot.

Facing the prospect of sustained American protectionism, most countries will intensify their efforts to lessen their economic reliance on the United States and deepen their ties with the rest of the world. Even strategic US allies in Europe and Asia will be pushed to hedge toward China. American interests and influence will be damaged accordingly.

Historian Arnold Toynbee once wrote that civilizations die by suicide, not murder. Trump’s “liberation” from the very global system America created is the kind of self-destruction Toynbee warned about.