Is Trump's tariff policy a disaster?

Globalization and its implications for the United States are crucial here. While globalization began with the era of major geographical discoveries and gained momentum during the industrial age, it was in the late twentieth century, particularly due to the policies of President Reagan, that the modern global market for labor, capital, goods, and services fully emerged.

This transformation was driven by the globalization of production and the shift of manufacturing to regions with lower labor costs. Although this model helped lift hundreds of millions of people out of poverty worldwide, it also resulted in economic insecurity for some American blue-collar workers.

In short, corporations and the financial sector have benefited from globalization, while blue-collar workers have not. Because the social gap between the rich and the middle class in the United States kept growing. The lack of proper social policy to reorient workers to new professions has increased discontent. Therefore, there is an objective social demand in the United States to “bring back the factories.” It is a mixture of nostalgia and fear for the future.

The argument surrounding the U.S. "negative trade balance" is largely manipulative, as the country offsets its goods deficit with substantial profits from capital, technology, and services.  The real issue lies not in the trade balance itself, but in how the “profits of globalization,” concentrated primarily within the United States, are distributed.

Trump and his team are trying to capitalize on this public discontent, but such an approach is unlikely to succeed. For the United States, this strategy doesn't guarantee a return to domestic production. In fact, rising prices and mutual sanctions could dampen demand and weaken exports.

The global economy is highly interconnected, with fragile supply chains. Imposing high tariffs on imports can not only drive up inflation but also disrupt entire production networks. As prices rise and demand falls, both production and exports could decline simultaneously.

Accordingly, if tariffs cause a general rise in prices and a decrease in purchasing power, the U.S. will not experience the expected industrial boom. This could lead to a prolonged recession.

Tariff wars in the geopolitical context

Trump and his entourage may fantasize about weakening the economies of competitors (China, Germany, etc.) based on the logic: "If everyone loses, America loses less." However, a global breakdown of supply chains and trade could trigger a worldwide recession, especially considering the lingering effects of COVID-19, the war in Ukraine, and other ongoing conflicts.

Lower oil and gas prices.  Energy prices — oil, gas, coal, and metals — are falling due to expectations of declining global demand. This is an extremely painful blow for Russia, as it has no other major sources of capital inflows other than the sale of raw materials.

On the other hand, the destruction of supply chains can lead to food crises and lower living standards. This will lead to increased instability, especially in countries with fragile economies (Africa, the Middle East, Latin America). New waves of migration, protests and conflicts are possible. Economic turmoil strengthens the stance of radical forces in Europe.

For Ukraine, this story presents both risks and opportunities. The widening gap between the United States and its partners may stimulate the regionalization of trade, especially in Europe and Asia. This opens a window of opportunity for Ukrainian exporters. At the same time, Ukraine does not benefit from a deep recession in Europe, as it could increase political risks and strengthen populists.

What's next?

A small, triumphant war? If Americans experience a sharp deterioration in their lives, Trump may look for a “quick win” on the battlefield (Iran, other high-profile conflicts) to justify the tariffs as preparation for an external clash. Such ventures further undermine global security.

What should Ukraine do? Strengthen cooperation with the EU and other potential partners (Turkey, Middle East countries, India, Southeast Asia, Africa.) Unity with Europe remains a key factor for Ukraine's security and economic stability, especially as Trump and Co. make more trash talk.

Ukraine must deepen its cooperation with the European Union and other potential allies (Turkey, countries in the Middle East, India, Southeast Asia, and Africa). Maintaining unity with Europe remains a cornerstone of Ukraine’s security and economic resilience, especially as Trump and Co. take more questionable steps.

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About the author. Yurii Bohdanov, publicist, expert in strategic communications in business, public administration and politics

The editorial team does not always share the opinions expressed by the blog authors.