NEW YORK (AFP) – In unveiling tariffs this week challenging the decades-old international trade order, United States (US) President Donald Trump lambasted globalisation as a raw deal for the US that has devastated US manufacturing towns.
Trump left out the upside to the US from the liberal flow of goods: a reliable supply of affordably priced appliances, clothing and electronics whose consumption has helped lift US economic growth above other developed economies in recent years.
“Obviously we’ve benefited significantly,” said global chief economist at S&P Global Ratings Paul Gruenwald. “We get to consume a lot of things that are produced more efficiently in other countries.”
Trump’s tariffs are almost certain to negatively impact this dynamic, say economists who see the levies lifting the price on everything from Gap t-shirts to the Apple iPhone to French wine.
“This is very clearly going to raise consumer prices,” US economist with Oxford Economics Michael Pearce said of the barrage of levies announced in an unveiling the White House billed as ‘Liberation day’.
Winners in Trump’s policy include communities that benefit from reshored manufacturing, while losers include export-focused industries like plane manufacturing and pharmaceuticals if there are retaliatory tariffs, Pearce said.
But imports represent only about 14 per cent of US gross domestic product, while exports account for 11 per cent – figures that are even lower if energy is taken out. Moreover, goods account for one-third of US consumption compared with services, which comprise the rest.
“The net impact on the US economy may be surprisingly small given the headlines we’re seeing,” said Pearce, who warned that Trump’s levies could end up disproportionately hurting low-income consumers if the tariffs are paired with tax cuts that benefit the wealthy.
Gruenwald, who described US consumer resiliency as a core strength in recent times, said S&P will lower the US outlook somewhat amid a higher inflation outlook for 2025. But he said the trade war “wouldn’t move the needle” in the short-term “for a big economy like the US.”
Trump’s White House event unveiled levies on dozens of countries including all major US trading partners. These included the imposition of 20 per cent levies on the European Union, 24 per cent on Japan and an additional 34 per cent on goods from China – bringing the new added tariff rate there to 54 per cent.
Trump cast the event in historic terms, saying it “will forever be remembered as the day American industry was reborn” and the country turned the page on globalisation.
“For decades, our country has been looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike,” he said.
