What if Mr. Trump returns to the White House and imposes huge tariffs? The world economy will "take a hit"

Nearly a century ago, when the U.S. increased tariffs on most imported goods, the consequences were severe. Specifically, global trade plummeted, the U.S. faced retaliation from other countries, and the Great Recession (2009) worsened.

However, the aforementioned tariffs – applied under the U.S. Tariff Act of 1930 – are nothing compared to the tariffs that Donald Trump has pledged to impose if he wins a second term in the White House.

During his previous term, Trump was dubbed "the tariff man."

The former US president wants to impose a 10-20% tariff on all goods imported into the country when he returns to the White House this year. This would be a significant increase from the current average of 2%.

For imports from China, Trump proposed an even higher tariff of 60%.

He shared in a recent interview with Bloomberg : "For me, the most beautiful word in the dictionary is 'tariff.' That's my favorite word."

Many economists have warned that the new tariffs will harm global economic growth and drive up inflation in the world's largest economy.

Most forecasters are predicting a negative outcome if Trump returns to the White House and imposes new tariffs. (Source: Asia Times)

No one is immune to losses.

Researchers from the Washington-based Peterson Institute for International Economics wrote in a recent note that imposing higher tariffs would alienate U.S. allies and partners, potentially triggering trade wars worldwide , harming global economic well-being, and undermining national security.

Most forecasters are predicting a negative outcome if Trump returns to the White House and imposes new tariffs.

For example, analysts at UBS estimate that a 60% tariff on imports from China and a 10% tariff on goods from the rest of the world would reduce global economic growth by one percentage point by 2026.

According to UBS, average company profits will fall by 6%, and global stock indices will also decline, particularly with sharp drops in European, Chinese, and other emerging market stocks. The European economy will also take a significant hit.

ABN AMRO Bank predicts that if the world's largest economy raises tariffs to 10% on all goods, the damage to the Eurozone's Gross Domestic Product (GDP) would be similar to the damage caused by the energy crisis resulting from Russia's special military operation in Ukraine.

The International Monetary Fund (IMF) also sees an impact on global output due to the potential for higher tariffs worldwide.

According to an IMF analysis published last year, in a "severe scenario" of increased tariffs and widespread trade restrictions, global output could fall by 7% in the long term.

"That would be equivalent to a reduction roughly equal to the combined annual GDP of Germany and Japan," the IMF stated.

Maurice Obstfeld, a senior fellow at the Peterson Institute, said: "Assuming that Mr. Trump implements the tariffs he proposes, no one will escape losses."

A spiral of trade measures initiated by the US.

Recently, speaking in Chicago, Trump reaffirmed his tough stance toward allies (including Japan, France, and South Korea) through tariffs, or simply by threatening to impose them.

CNN argues that if he returns to the White House, this approach to trade relations would further undermine the principles of open and competitive trade – which have fueled global economic growth for decades.

Meanwhile, Maurice Obstfeld argued that Trump's approach would leave the global trade system a chaotic mess of bilateral agreements.

"No one can predict how that system will work. But it's certain that the benefits from trade will decrease and trade relations between countries will become more fragmented," said Maurice Obstfeld.

Former US President Trump wants to impose tariffs of 10-20% on all goods imported into the country when he returns to the White House. (Source: Bloomberg)

Meanwhile, Professor Petros Mavroidis at Columbia Law School (USA) sees an even bleaker outcome.

He asserted: "I think it's unrealistic. The world has to be connected both economically and non-economically. If it's not connected, then you're going to pay the price. Other countries can impose retaliatory tariffs on imports from the US, or tariffs on imports from elsewhere to protect their markets."

Looking back to 2018, when President Trump announced tariffs on steel and aluminum imports into the US, the European Union (EU) immediately imposed its own tariffs on certain steel products, citing higher import risks. The bloc also retaliated directly against Washington with tariffs on more than $3 billion worth of US goods, including motorcycles, denim, and whiskey.

Andre Sapir, a senior fellow at Bruegel, a Brussels-based think tank, stated: "Countries could be caught in a spiral of trade measures initiated by the United States."

No leniency?

Besides tariffs, economists are also unhappy with former President Trump's desire to exert more control over the Federal Reserve (Fed).

During the election campaign, Trump repeatedly asserted: "For some time now, Fed Chairman Jerome Powell has kept interest rates too high."

However, economists believe that any attempt to undermine the Fed's independence would shake global financial markets and destabilize the US dollar – the world's leading currency used for trade payments and foreign exchange reserves.

However, Edward Alden, a senior fellow at the Washington-based Council on Foreign Relations, said that Trump is unlikely to interfere with the Fed's independence, as such a move could pose risks to the world's largest economy.

He predicted that if the "tariff man" returns to the White House this year, his actions will certainly be no less unforgiving than during his first term!

Source: https://baoquocte.vn/bau-cu-my-2024-se-the-nao-neu-ong-trump-tro-lai-nha-trang-va-ap-thue-khung-kinh-te-the-gioi-chiu-don-291683.html