Donald Trump is undeterred as he plays Nero amidst global chaos.
The markets have crashed to an 11-month low, investors have lost over $5.4 trillion, his country is staring at a recession, Americans are up in arms against him, businesses are on the edge, trying to preempt his next move and the world is staring at unprecedented levels of uncertainty. But Mr Donald Trump is showing no sign of repentance, remorse or retreat.
His cleverly crafted script – which preempted the entire world to capitulate and sit on the negotiation table after his Liberation day has fallen flat, at least for now.
During his Rose Garden address on April 2 Trump recited, almost gleefully, his intentions to “pry open foreign markets and break down foreign trade barriers.” He imposed tariffs exceeding even the levels of 1910. They surpassed the 1930 Smoot-Hawley tariffs that triggered the Great Depression, clearly underscoring his anti-global and protectionist policy and catalyzing a Wall Street meltdown.
His self-touted masterstroke move was to change the trajectory of global trade, restore American jobs, transform the US from dependence on foreign imports and build a production-focused Made in America economy.
However, what ensued is nothing less than geopolitical mayhem where US has turned friends into foes with European leaders threatening to backlist US companies; China and Canada hitting back with retaliatory tariffs and countries like India keeping their options open to negotiate in a profitable scenario.
Irked by the rudimentary math that went into calculating the tariffs, economists state if Trump was playing chicken with the rest of the world, he lost round one. “I think this is the biggest policy mistake in 95 years,” Wharton School professor Jeremy Siegel told CNBC. “This is a self-inflicted wound. It’s an unforced error – did not have to happen.”
Investors have responded by selling everything except bonds. And after China’s 34% retaliatory move experts warn of a Black Monday worse than 1987, when the markets had hit a lower circuit. The meltdown won’t be limited to US, the entire global markets are expected to go down with it.
How Americans are the biggest victim of Trump’s tariff gambit?
American consumers, reeling under inflations and low consumption will see prices rise exorbitantly considering it imports roughly 40-45% of its retail products. In 2024, the U.S. imported approximately $3.1 trillion worth of goods, according to data from the U.S. Bureau of Economic Analysis and Census Bureau out of the $ 7 trillion retail sales.
97% of apparel and 98% of footwear sold in the U.S. are manufactured abroad. Electronics also see import rates exceeding 90%, with products like smartphones and computers predominantly made overseas. Food and beverages are less import-dependent, with about 15-20% of consumption coming from imports, per USDA data.
Even though common American citizens have hit the streets against Trump’s policies corporate world is silent. A Financial Times report states US companies are struggling to figure out how to respond to Donald Trump’s trade war. Feeling fear of retaliation they feel, “You don’t want to be the barking dog for everyone else because you’re going to be the one who will get shot,” FT quoted an anonymous person who leads the board of a US company. Another stated that many companies had analysed and gamed out tariffs to see their impact on their bottom lines and drawn up solutions to be prepared for “liberation day”, when the tariffs were announced.
Companies like Nike and Apple which had shifted production to Vietnam and India would prefer increasing prices in the US rather than push up their manufacturing costs.
Can Trump win tariff offensive?
Despite the initial setback can Trump prove his critics wrong? Even if he is successful in dragging nations to the negotiation table, it will require a huge retooling of an economy that in 2024 where 68% of activity to consumer spending and had a trade deficit of $903 billion.