“Any hope of robust economic growth resulting from unleashing energy abundance, deregulating the private sector economy, or pro-growth tax policy may now be doused by the economic fallout of a pointless trade war.
It started as a murmur—a slight downward revision, nothing alarming. But within five days, the Federal Reserve Bank of Atlanta’s GDPNow forecast for the first quarter of 2025 went from mild optimism (2.3 percent growth) to outright recessionary territory (-1.5 percent). By March 3, the number had plunged to -2.8 percent, the kind of contraction that doesn’t just signal weakness but outright economic distress. Eight months of stock market gains were wiped out in less than four weeks.”
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“Global supply chains are rattled, businesses are reluctant to invest in capital, and consumers are cutting back on purchases. Tariffs—pitched as a way to bring jobs back—have instead choked growth. The administration’s bet that protectionism would insulate the economy from foreign competition is proving to be precisely the opposite: a self-inflicted wound.”
“instead of trying to decouple unilaterally from China, let’s do it in an organized manner together. Let’s sit together at the negotiation table, because if 300 million Americans impose tariffs, that’s one thing. But if 300 million Americans plus 500 million Europeans and some of the largest economies in the world and other democracies from Japan to Australia are warm-heartedly invited to join, then I think we will have a much better outcome that is very much to the benefit of every non-authoritarian economy, but most importantly, for the U.S.
I would strongly suggest that “America First” will only work if it’s not America alone. And there are some issues where America will need partners in order to have the ultimate leverage, and I think that leverage would be increased by joining forces.”
“The European Union hit back hard as U.S. President Donald Trump imposed 25 percent global steel and aluminum tariffs on Wednesday, announcing a two-stage retaliation covering €26 billion in EU exports that far exceeded a trade fight that blew up in his first term.
The European Commission said it would, from April 1, reimpose tariffs in response to €8 billion in U.S. tariffs — including on iconic American products such as Harley-Davidson motorcycles, bourbon and jeans. And, from mid-April, it will set further countermeasures over €18 billion in new U.S. tariffs, subject to the approval of EU member states.
“We deeply regret this measure,” European Commission President Ursula von der Leyen said in an early-morning statement.”
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“The 27-nation bloc — a common market spanning 450 million people — wants to send an unmistakable message that the EU is serious about defending its economic interests should Trump launch a full-scale trade war.”
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“The Commission left the door open to a deal with Trump, saying it “remains ready to work with the U.S. administration to find a negotiated solution” and adding that its measures “can be reversed at any time should such a solution be found.””
An immediate impact of tariffs is increased prices. Paying more means less money for other purchases and investments. Less purchases and investments means a smaller economy than there otherwise would be. A smaller economy means less wealth and jobs for most people.
“Trump and his allies believe tariffs are the key to all sorts of wondrous economic outcomes that will make America more prosperous. In his speech to Congress on Tuesday night, Trump said that tariffs “are about protecting the soul of our country,” whatever that means.
But even if you buy those arguments, it should be obvious that tariffs being implemented and then immediately withdrawn (for the second month in a row) will not produce the promised benefits.
They won’t generate revenue for the government, won’t cause businesses to alter their supply chains, and won’t stop the flow of illegal drugs. It’s the equivalent of looking at a river, declaring your intention to build a dam, and then expecting the river to become a reservoir.”
“The trade deficit is huge. It stands at $235.6 billion — a 12.9 percent increase since 2023. EU countries impose an average 5 percent tariff on U.S. goods, while the U.S. imposes an average 3.3 percent tariff on European goods. Even worse, the EU collects a 10 percent tariff on car imports — that’s four times America’s 2.5 percent.”
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“This has to change — and it can — but not through a tit-for-tat race to higher tariffs. Rather, we need to lower tariffs and observe symmetry. Ideally, EU-U.S. trade would be tariff-free. However, if that’s unachievable, tariffs should be, on average, 2 percent on both sides. That would create a huge stimulus for both economies, and it could be the basis and precondition for what is existentially necessary: a common trade strategy on China.”
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“If Trump is serious about “America First,” there’s one thing he should come to terms with — it shouldn’t mean “America Alone.” More leverage at the negotiating table with China, a healthy U.S. economy without inflation, and a prosperous Germany that could turn around a stumbling EU would be in the interest of the American people and Europe.”
“Part of his administration’s solution to the high price of eggs? More imports. As part of a $1 billion plan to combat the bird flu, the U.S. Department of Agriculture (USDA) announced..that it would seek to expand imports of eggs”
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“A sudden constraint on supply—in this case, the bird flu—has pushed prices higher, and finding alternative suppliers might help ease the pain.
Now, someone in the White House might want to apply that same analysis to Trump’s plan for more tariffs on two of America’s biggest food suppliers.
Trump backed down from his threats to slap 25 percent tariffs on all imports from Canada and Mexico earlier this month, but at the time, he said those tariffs were merely delayed by 30 days.”
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“Canada and Mexico accounted for 28 percent of all imports to the U.S. last year. If the costs of Trump’s tariffs are fully passed down the supply chain, consumers could be facing $225 billion in higher costs, according to an estimate by the American Action Forum (AAF). The energy and manufacturing sectors figure to be the hardest hit, thanks to the deeply integrated North American supply chains for products ranging from crude oil to critical minerals like cobalt and zinc.
Food prices would likely rise too. The U.S. imports more food than ever before, Bloomberg noted this week, and many of those imports come from America’s two neighbors. Mexico is America’s largest source of agricultural imports, according to the USDA. That includes 63 percent of U.S. vegetable imports and 47 percent of U.S. fruit and nut imports. All of that would be affected by the new tariffs.”
“the way we think about how China would overrun Taiwan may well be wrong. Rather than an all-out invasion, it could attempt to capture the island without firing a single shot through “gray zone” tactics. Such tactics might combine maritime blockades and advanced cyberwarfare capable of cutting off Taiwan from the lines of seaborne trade and the digital access it needs to survive. And Beijing could do so in a way that might be just far enough below the threshold of conflict that would drive Washington and its allies to come to Taiwan’s aid.”
“The economic uncertainty created by Trump’s tariff threats has already warped markets and harmed the economy in ways large and small.”
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“Uncertainty created by Trump’s trade policies reduced aggregate U.S. investment by as much as $47 billion in 2018, according to a 2020 study in the Journal of Monetary Economics.
The authors of that paper wrote that “all measures suggest that uncertainty about trade policy has recently shot up to levels not seen since the 1970s.” They concluded that “both higher expected tariffs and increased uncertainty about future tariffs deters investment.””