Many people are not worried about the recent tariffs imposed by Donald Trump. Yet members of Congress, governors from both parties at the state level, and even some Republicans in Washington are increasingly concerned about the trade tensions that his tariff announcements have led to.
Set to commence on February 1 st 2025, these tariffs include a 10% levy on Chinese imports and a 25% duty on goods from Canada and Mexico. Such actions by the Trump administration are said to be necessary by some domestic contingencies; otherwise, it risks the invasion of illegal immigrants, encroachment from drug traffickers, perceived trade imbalance, and capital flight. Nevertheless, experts warn that they might lead to a global economic crisis, destroying the US dollar’s credibility and straining relations between countries.
Potential Economic Impacts
The introduction of these tariffs is expected to have widespread economic implications. Historically, tariffs have meant higher costs for goods which invariably gets passed on to consumers in the form of increased prices. For example, the proposed tariffs would have a huge impact on the prices of medicines in the United States. China, Canada, and Mexico are all important suppliers of finished pharmaceutical products and can also offer raw materials. This might lead to higher costs for painkillers, antibiotics, and anti-cancer drugs, and possibly even shortages.
In addition, import costs to the production industry could be so high that lead to rising activity costs and loss of jobs. According to a study by Oxford Economics and the Business Council of China, the United States lost 245,000 jobs from tariffs in trade disputes. The reintroduction of similar tariffs might worsen this trend, especially in industries dependent on international supply chains. Dr. Jian Yang is a senior lecturer in economics at Auckland University of Technology.
Global Trade Relations and the US Dollar
Trump’s strategy of using the US dollar as a means to enforce trade policies may have unexpected consequences. When other countries are pushed into using the dollar, they may discover that there are alternate currencies available. In this way, the dollar’s dominance over international trade could be undermined. Not only would such a shift weaken the US currency but it would also bring a reduction in the country’s significance for world economic matters.
And the tariffs in addition seemed inevitable to strain relations with major trade partners. Canadian Prime Minister Justin Trudeau indicated that Canada would act sharply against any new levies, saying “everything” was on the table. If escalation occurs, it will merely add another vicious cycle to an already vicious circle.
Historical Context and Future Outlook
Using tariffs as a tool of economic policy is not unprecedented. The scale and scope of the proposed measures are, however, a throwback to the days of protectionism. Historically such policies have wound up in trade wars and economic doldrums. For example, the Smoot-Hawley Tariff Act of 1930, which raised US tariffs on a host of goods, is widely seen as having aggravated the Great Depression by choking off international trade.
In today’s world of global trade, economies worldwide are intertwined like never before. Economists warn that these new tariffs may bring on a world economic crisis. Countries are busy setting up countermeasures, and disruptive effects on supply chains are beginning to be felt. The specter of increased inflation, job losses, and shrinking consumer spending all spell danger for both domestic and global economies.
President Trump’s aggressive trade policies are intended to protect American interests, but their potential consequences indicate a need for more moderate ones. By convening multilateral consultations, building a better framework of international trade institutions, and addressing the root cause with customary negotiations and studies, a policy approach that would curtail risk from broad tariffs can be developed. February 1 is approaching, and the world is anxious. We hope for discussions, agreement, and understanding rather than unilateral action that coerces others into just caving in anyhow.
