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The Impact of Trump 2.0’s Trade Doctrine on Global Economic Stability

Concerns rise as Trump’s potential second term looms, threatening global economic stability

As Donald Trump moves closer to a potential return to the presidency, concerns over global economic stability have intensified, particularly regarding his stance on trade, tariffs, and America’s role in the world order.

His upcoming second term could threaten to dismantle the open-market framework established after the Cold War, with Trump expected to push for a protectionist agenda that might deepen the ongoing trade war with China.

Trump’s economic policy is expected to heavily rely on imposing tariffs, with proposed duties reaching up to 60 percent on Chinese imports and 10 to 20 percent on goods from other nations—levels reminiscent of the Great Depression.

Protectionist agenda from Trump could reshape America’s role in global trade relations

In his first term, tariffs impacted $380 billion worth of Chinese imports to the U.S., but this time, his proposed tariffs could affect an even larger scale of trade. This protectionist direction represents a sharp break from traditional American economic policies, emphasizing reshaping global trade relations.

Trump argues that these tariffs would protect American jobs, boost domestic manufacturing, and reduce reliance on foreign imports, although the consequences of these policies could be more complex than he suggests.

Economists warn that steep tariffs could increase inflationary pressures, raising costs for consumers while triggering retaliatory trade actions. Trump also advocates for removing taxes on tips and Social Security benefits, as well as cutting corporate taxes, in an attempt to spur domestic economic growth and reduce inflation.

During his first term, similar measures were implemented, such as tariffs on steel and aluminum, framed as national security measures, but these policies sparked immediate backlash from U.S. allies.

Countries like Canada and the European Union retaliated with their own tariffs on American agricultural products, which hit U.S. farmers hard. If Trump moves forward with broader tariffs, experts caution that it could lead to another wave of retaliatory measures, escalating tensions not only with China but also with traditional allies, potentially creating a global trade conflict.

Trump’s proposal also raises questions about the U.S. commitment to the World Trade Organization (WTO), which enforces tariff limits among member nations. If the U.S. exceeds these limits, it risks violating international trade agreements, which could exacerbate global tensions.

Historical patterns show that countries are likely to retaliate when they perceive that the U.S. is bypassing established trade norms, potentially triggering a damaging conflict with far-reaching global consequences.

Trump maintains that his focus on tariffs and revitalizing U.S. manufacturing will combat inflation and reduce the cost of living for American families. He contends that foreign producers will bear the burden of the tariffs, sparing American consumers from higher prices.

However, economists caution that while tariffs are meant to shield domestic industries, they typically result in higher costs for consumers as businesses pass on the increased expenses.

The anticipated impact is straightforward: Import prices will rise, and domestic goods, often substitutes for imports, are likely to follow suit. However, Trump’s tariff policies may have a ripple effect beyond U.S. borders, potentially triggering a chain reaction of responses from global trading partners, escalating the risk of a broader trade conflict.

In today’s interconnected economy, protectionist measures from Washington are unlikely to remain contained, disrupting supply chains, straining relationships with allies, and affecting economies that rely on stable trade with the U.S.

According to a study from the London School of Economics, Trump’s policies could reduce China’s GDP by 0.68 percent, with smaller but still contractions in the European Union, India, Indonesia, and Brazil.

Trump’s focus on reducing Social Security and tip taxes highlights his domestic agenda

These potential economic shifts highlight the global concerns surrounding a U.S.-centric trade policy. Another aspect of Trump’s economic agenda that raises alarms is his desire to exert more control over the U.S. Federal Reserve. The Fed, which has traditionally operated independently, oversees monetary policy, including inflation management and labor market stability.

Although U.S. presidents influence the Fed indirectly through appointments, Trump has expressed a desire for greater control over its actions. During his previous presidency, he criticized the Fed for raising interest rates, arguing that a more accommodating policy would have helped his economic goals and alleviated inflation. This push to influence the Fed raises critical questions about the independence of the central bank.

If the Federal Reserve’s independence were to be compromised, the effects could be felt globally. Financial markets may lose confidence in U.S. bonds and the dollar, traditionally seen as safe assets. Economists warn that even the perception of diminished Fed independence could have severe consequences, undermining the credibility of U.S. monetary policy and shaking global markets.

Should Trump’s influence over monetary policy grow, it could undermine trust in the dollar as the world’s primary reserve currency, with ramifications extending well beyond the U.S. As he continues his campaign to reclaim the presidency, the world watches closely, uncertain of how his trade and economic policies might uncover.

Despite his known unpredictability, the true impact of Trump’s proposed trade measures remains uncertain. It is unclear whether he will stick to his tariff proposals once back in office or if his policies will shift in unexpected ways. For now, the global community remains attentive, weighing both the potential benefits and risks of his hardline trade strategy.

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