Sat, 05 Apr 2025

Sat, 05 Apr 2025 Trump has turned his back on the foundation of US economic might - the fallout will be messy

What made the US step back from the system that it profited handsomely from for decades?
1. Loss of manufacturing jobs: The "China shock" in 2011 resulted in a loss of one million US manufacturing jobs, according to Autor's calculation. This trend is likely to continue with Trump's tariffs. 2. Geographic concentration of job losses: The Rust Belt and the south are disproportionately affected by trade shocks, leading to economic decline in these regions. 3. Rise of protectionism: Trump's policies reflect a shift towards protectionism, which can have far-reaching consequences for international trade and global economic stability. 4. Impact on major blue-chip American companies: Companies that rely heavily on East Asian supply chains are facing significant challenges due to the tariffs, including damage to their brand image among global consumers. 5. Formation of new alliances: Other countries may form alliances to cut out an erratic US, which could lead to a more complex and volatile international trade system. 6. Unintended consequences: The author suggests that Trump's policies may have unintended consequences, such as weakening the dollar and lowering US borrowing costs. The article also notes that: 1. Credibility matters in trade wars: To be effective, tariffs need to be seen as credible threats by other countries, which is a challenge for Trump given his history of flip-flopping on trade policies. 2. Global consumers have choices: Other countries can choose not to support the flows of capital and trade that have made the US rich, leading to a more complex global economic landscape. Overall, the article presents a nuanced view of Trump's trade policies, highlighting both their potential benefits for certain regions and industries as well as their broader implications for international trade and global economic stability.
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