Donald Trump is set to unveil a plan that could effectively end decades of economic globalization, potentially launching a universal tariff on all imports into the USA.
Every time Donald Trump has discussed his plan to levy massive tariffs on imports, there have been widespread assumptions of delay, reduction, or rollback. However, today he will reveal the seriousness of his intentions in the White House Rose Garden.
The potential of a 20% universal tariff is seen as the only way to achieve the massive revenues claimed by some of his advisors. This could involve broadly bracketed tariff levels across different countries.
As one G7 negotiator stated at the weekend, “it all comes down to President Trump”.
Potential Impact:
The consequences could be significant:
- UK Economy: A system of global retaliation could shrink the UK economy by 1%, wiping out growth and leading to pressure for tax rises or spending cuts.
- Global Cost: According to an Aston University Business School study, the total cost globally could reach $1.4 trillion (£1.1tn) due to trade diversion and rising prices.
- Industry Targeting: The EU could potentially target US tech companies.
Historical Parallels:
Trump’s plan bears a resemblance to the Smoot-Hawley tariffs, a historic event nearly a century ago that led to severe economic consequences.
Shifting Priorities:
The administration’s view is that globalisation has failed, particularly in the case of China, where the expectation was that richer countries would move up the value chain while poorer countries handled simpler tasks.
Potential Counter-Response:
China is expected to be waiting, and a hit to US businesses in Europe could be offset by cheaper electronics, clothes, and toys arriving in the UK.
This announcement represents a significant shift in how the world conducts business and the global trading system.