Donald Trump’s economic policies have proven to be remarkably divisive. By extension, largely in silence, people are discussing their drastic effects on the United States and global economy. The critics attack these policies under the banner of economic nationalism. In a public letter to Congress, they continue to raise the alarm on how this trend is reducing U.S. influence across the world. It appears his advisors and the Republican leadership in Congress have lost touch with basic economic reality. All the while, the fallout from their bad choices continues to make itself known.
The unilateral imposition of tariffs has been one of the defining features of Trump’s administration’s aggressive approach to international trade. These tariffs are increasing costs for American businesses and consumers, many of whom are forced to rely on foreign suppliers. In turn, that makes it difficult for foreign suppliers to buy from U.S. companies—causing a chain reaction that even hits you and me. As foreign suppliers’ sales and income decrease, they will find it difficult to reach U.S. producers with their services. This vicious feedback loop only serves to compound the harm they’re already facing.
The cost of this gamble is that Trump’s policies are more and more isolating the United States on the global front. Instead of taking steps to right the ship, the administration is doubling tariffs against friends and foes alike. In retaliation, the countries impacted are proactively looking to establish new trading partners. This change dramatically advantages China. Perhaps most notably, it has cleverly capitalized on the United States’ own retreat from international trade to expand its own global trading connections. By taking advantage of and building upon Trump’s economic approach, China is strengthening its role in areas once dominated by U.S. trade policy.
In addition to damaging the U.S.’s soft power and diplomatic reach, Trump’s agenda endangers the U.S.’ geopolitical standing. Oil refiners are trying to send foreign business operations out of reach of U.S. markets in order to dodge increasing tariffs. This change has the effect of hugely limiting the potential market share available for U.S. producers. In this climate, free and fair trade is essential, not only for the United States but for maintaining global economic stability.
The realities behind the implementation of these policies are more complicated than just the economics. Frankly, Trump’s economic advisors and Republican leaders must be complicit in permitting these changes to take place in the face of obvious harmful effects. This entanglement calls into question their commitment to good economic policy. It inspires concern about what these policies would do to the U.S. economy in the long term.
Higher tariffs always end up being passed on to American consumers. Companies that use imported goods often feel the pinch as their costs go up. Consequently, they have little recourse but to pass these costs through to consumers, resulting in increased prices across all sectors. Such outcomes could lead to reduced consumer spending, an essential driver of economic growth, which further exacerbates the challenges facing American businesses.
As Trump starts to make his economic vision a reality, these same experts are greatly concerned and the consequences could be catastrophic. An isolationist approach would be destructive to U.S. economic interests. It undermines the entire international rules-based trading structure that has provided prosperity to numerous countries globally for decades.