Trump has tried to overturn the entire economic order that revolves around free trade and the US transition from a manufacturing-intensive economy to a service-oriented economy.
The baseline 10% tariff came into effect on Saturday, with dozens of countries facing so-called mutual tariffs since Wednesday. China said Friday it would impose a 34% tariff on all goods imported from the US starting this Thursday, when US tariffs are expected to rise on Chinese products.
It seemed like Trump wasn’t growing anytime soon. On Monday, he threatened China with an additional 50% tariff by Wednesday if he did not withdraw his retaliation measures. The White House later revealed that it meant a total of 104%.
Trump said tariffs may be permanent, but they could also be subject to negotiations.
“We’re going to get fair deals and good deals with everyone,” Trump said from his oval office, where he was meeting Israeli Prime Minister Benjamin Netanyahu. “And if we don’t, we have no connection with them. They will not be allowed to join the US.”
And he continued to say the US needs to close the trade deficit – when country imports exceed exports, economists say it means a massive, potentially impossible reorientation of the US economy.
Trump tried to portray his strategy as a victory. “Almost every country wants to negotiate,” he said Monday.
He said he spoke to the Japanese prime minister who had been sending his team to negotiate. He said, “They have treated the US very poorly in trade. They don’t take our cars, but we take millions of theirs, agriculture as well, and many other “things.” It all needs to be changed, especially in China!!!”
But the overwhelming consensus between economists and well-known business executives is that tariffs are a major mistake. Goldman Sachs analysts likened them to “Pandora’s Box,” adding that US actions, particularly towards China, are “substantially higher” than most investors expected.
And criticism from within Trump’s orbit – rare these days – is growing. R-Texas’ Ted Cruz ses. and Rand Paul (R-Ky.) both have publicly debated tariffs.
“One person can make a mistake, what can you guess – tariffs are a terrible mistake,” Paul said last week.
Even Elon Musk has accused White House top trade adviser Peter Navarro of defending tariffs. Musk, the CEO of Tesla and the world’s wealthiest man, shared a video on Monday in which economist Milton Friedman talks about the benefits of importing goods and free trade.
If Trump maintains his current course, hedge fund investor Bill Ackman said, “We’re heading for a self-inducing nuclear winter.
In the meantime, at least one bank giant has predicted that the unemployment rate has already risen from 4.2% to 5.3%, with the economy poised to sign.
In an annual letter to shareholders on Monday, JPMorgan CEO Jamie Dimon warned that tariffs will boost inflation and strain the economy already on sale.
“Given the justifications of the newly announced tariffs, there are, of course, a few. Or, the long-term effects are likely to have a significant short-term impact, whether they are good or bad,” Dimon said. “We could see inflationary outcomes as input costs rise and demand for domestic products increases, not just at imports but at domestic prices.”
Trump pointed to a decline in oil and food prices and lower interest rates, inaccurately claiming that there is no inflation and that the Federal Reserve is calling for cuts to interest rates.
“Our past ‘leaders’ are to blame for allowing this and letting many other things wake up in our country,” he wrote.
In fact, the price drops mentioned by Trump were primarily a function of undermining economic growth.
There were signs of slower activity when the Biden administration fell, but the uncertain business environment Trump created helped to reduce consumer and business sentiment, but overall price growth continues. As a result of that stubborn inflation, consumer borrowing rates have not changed much. It contradicts Trump’s claims.
