A new research has highlighted the potential significance of the proposed tariffs by the United States on the global economy.
To recap, President Donald Trump has announced 25% tariffs on goods from Canada and Mexico, with another 10% affecting China. In doubling down on the new tax measures, Trump also outlined a plan to roll out a 25% tax on all steel and aluminum goods entering the U.S.
If fully implemented, Trump’s tariffs will reach their highest level since the Great Depression. According to insights shared by investment research platform Bravos Research in an X post on February 11, this move could send shockwaves through the global economy.
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Impact of U.S. tariffs
According to the analysis, the Tax Foundation estimates that the average U.S. tariff rate could soar to 17.7% under President Trump’s proposed policies. If these policy measures are implemented, the research entity cautions that they would reverse decades of trade liberalization and globalization.
To put this warning into perspective, the tariffs have steadily declined for the past 70 years, aligning with the rise of free trade agreements and global supply chains.
However, these new policies would mark a sharp reversal, bringing protectionism back to levels not seen since the 1930s.
It’s worth noting that tariffs have long been used to influence economic policy, and their impact extends far beyond international trade. One of their key objectives is to boost domestic manufacturing by making foreign goods more expensive and increasing the competitiveness of U.S.-made products.
Bravos Research noted that over the past several decades, the U.S. has experienced a significant decline in manufacturing jobs, particularly since 1980, coinciding with a rise in imports.
Growing income inequality
At the same time, economists argue that the offshoring of manufacturing has contributed to growing income inequality, as middle-class wages have risen only 73% since 1980, compared to a 326% increase for upper-income wages. While a substantial tariff hike could reverse this trend, benefits would likely take years to materialize.
Another key aspect of tariffs is their role in generating revenue when the country runs a $1.5 trillion deficit per quarter.
Therefore, once the tariffs take full effect, estimates indicate they could generate $3.7 trillion over the next decade, equivalent to approximately 10% of the total U.S. national debt.
While the United States might see several benefits in the long run, the data indicates a significant potential impact on globalization.
Between 1980 and 2010, global trade openness surged, enabling U.S. businesses to expand supply chains overseas and increase profits.
While the 2008 financial crisis and COVID-19 pandemic temporarily slowed globalization, they did not reverse it.
However, rolling out Trump’s policy recommendations could mark a key turning point that would dismantle decades of economic connections.
Therefore, the next few months will play a crucial role as they will determine how these proposals will impact the trajectory of global trade. Already, the stock market has seen increased volatility as uncertainty lingers.
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