Why does Trump intend to impose tariffs on imports? | economy

US President-elect Donald Trump confirmed that his first economic measures after his inauguration will be to increase customs duties on products imported from China, as well as Canada and Mexico, in decisions he attributed to the crises related to opioids and immigration.

In a post on his account on his platform (Truth Social) for social networking, Trump wrote, “In one of the first of many executive orders that I will issue on January 20, I will sign all necessary documents to impose tariffs on Mexico and Canada at a rate of 25% on all their products imported into the country.” US”.

In a separate post, the US President-elect wrote that he would also impose on China additional customs duties of 10%, in addition to the current duties, and those that he may decide in the future, “on all the many goods coming from China to the United States.”

Why is Trump imposing these tariffs?

Trump seeks to reduce his country’s trade deficit, which tends in favor of several countries and economic blocs in intra-regional transactions. He also aims to restore factories that were opened in other countries to exploit cheaper production factors, as well as providing more job opportunities in the American economy.

The US trade deficit means that the country imports more than it exports.

Official figures show that the US trade deficit reached $861.4 billion in 2021, $945.3 billion in 2022, and $773.4 billion in 2023.

But there are fears that Trump will use tariffs as a tool to address problems not only related to trade, according to what Bloomberg reported earlier.

In 2019, he threatened to impose 5% tariffs on Mexican imports in order to stop the flow of illegal immigrants across the border, a threat that ended with the two countries reaching an agreement on immigration.

Although sanctions were a large part of American economic policy, the Bloomberg report made it clear that sanctions have become less effective in reducing the influence of targeted countries, especially with the increasing attempts of some countries, such as the BRICS countries, to avoid the dollar in their commercial transactions.

This is why, during his election campaign, Trump added another purpose to imposing tariffs, which is to protect the dollar. He said last September that he plans to impose huge customs tariffs of up to 100% on countries that attempt to trade outside the dollar-based financial system, with the aim of protecting the dollar’s ​​position as a global reserve currency. .

He added: “We will keep the US dollar as the world’s reserve currency, which is currently under a major siege.”

Is it beneficial to the United States?

Some economists and experts expressed reservations about Trump’s plan. According to Eswar Prasad, a senior fellow at the Brookings Institution, “using tariffs in this way may have the opposite effect, as it encourages countries to reduce their dependence on the dollar and thus reduce their exposure to the fluctuations of American policies.”

Ulrich Luchtmann, a strategist at Commerzbank AG, also warned that this step could cause major disruption in the global economic system.

On the other hand, customs tariffs would increase the value of the dollar globally, as countries export their products to obtain the dollar (the global trade currency), and imposing customs tariffs would raise the price of imported goods in the United States, which would consequently reduce demand for them. Consequently, countries’ exports to the United States would decline, which would lead to There will be a shortage of the dollar and an increase in its price, and Trump intends to cut taxes, which will make him resort to debt, raise the yield on American bonds, and absorb financing from countries around the world to the strongest economy in the world.

The rise in the value of the dollar against other currencies may compensate for the rise in prices of imported goods in the United States for the consumer, according to what the Financial Times reported in a previous report, but the greatest negative impact will be on American companies that export their products to the world with the dollar, which will become more valuable, which will reduce the competitiveness of goods. American services versus competitors’ products.

Those affected

The International Monetary Fund warned this month that retaliatory tariffs could hamper economic growth prospects in Asia, lead to increased costs and disrupt supply chains, despite the Fund’s expectations that the region will remain a major engine of growth in the global economy.

“Retaliatory tariffs threaten to disrupt the region’s growth prospects, leading to longer and less efficient supply chains,” IMF Asia-Pacific Director Krishna Srinivasan noted during a forum on systemic risks in Cebu, Philippines.

IMF forecasts indicate that these tariffs may hinder global trade, negatively affect the growth of exporting countries, and increase inflation rates in the United States.

Analyzes indicate that Trump’s policies in his second term may have wide-ranging impacts on global economies, with Mexico, China, and Europe emerging as the most affected regions.

As Trump’s policies are implemented, developing economies may see additional burdens due to the higher cost of dollar debt, according to The Economist.

On the other hand, calls have emerged to avoid reciprocating tariff policies, and instead focus on enhancing competitiveness through economic reforms.

China here appears to be in a better position to deal with these changes, thanks to its focus on domestic demand, according to what The Economist newspaper reported in a report, while the European Union suffers from a delay in developing its internal market and adopting artificial intelligence technologies.

The Economist notes that countries need to quickly adapt to these changes, focusing on domestic reforms rather than trade escalation.

American companies benefit most

Through Trump’s presidential campaign, American companies that manufacture locally and face competition from external players in the American market emerged as supporters of Trump, as they benefited from imposing customs tariffs on competing imported goods. On the other hand, we find that transcontinental companies that call for economic openness, such as technology giants, were not among the Among his supporters, which reveals economic damage, the consequences of which will be borne by the policies of the president returning to the White House.

US debt rises

As for the American economy, its benefit or harm from Trump’s policies is viewed entirely from the perspective of the president-elect’s policies. The president-elect seeks to reduce taxes and partially compensate for the decline in revenues from high customs tariffs, but he will most likely raise the American public debt to historic levels, according to an analysis by the Financial Times.

A poll conducted by Reuters in cooperation with Ipsos this month showed that most Americans believe that President-elect Donald Trump will push the US government towards greater debt during his next term.

The results of the poll, which lasted for two days and concluded last Thursday, revealed that 62% of participants – including 94% of Democrats and 34% of Republicans – believe that Trump’s policies “will push the US national debt higher.”

Reuters noted that Trump’s tax cut plans could add about $7.5 trillion to the national debt over the next decade, according to estimates from the nonpartisan Committee for a Responsible Federal Budget. While Democrats express greater concern about the financial situation under Trump’s policies, with 89% of them expressing their fear of an increase in public debt, only 19% of Republicans see these fears as justified.

Last month, the US Federal Budget Committee predicted that the economic plans proposed by Trump during his election campaign, if implemented, would lead to an increase in the federal debt by about twice the expected increase of the economic plans proposed by his former rival, Kamala Harris.

According to the nonpartisan committee’s analysis, the federal debt is likely to swell by 2035 by $7.5 trillion if Trump wins and implements his pledge to cut taxes on individuals and corporations, implement significant tariffs on imported goods and deport millions of immigrants, along with other measures he intends to implement.

US debt currently amounts to 99% of gross domestic product, according to the Congressional Budget Office, and it is expected to rise to 125% 10 years from now if there are no changes in current laws.

If Trump’s economic program is implemented, it is expected to increase it by 17% to 142% of the gross domestic product, which exceeds 28.8 trillion dollars.