George Alogoskoufis

Adapted from an article in Greek, published in the newspaper To Vima, Sunday, 13 April, 2025

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On April 2, 2025, President Trump issued Executive Order 14257, imposing ‘reciprocal tariffs’ on nearly all the trading partners of the U.S.A. The tariffs include a 10% base tariff on nearly all imports, with some countries facing significantly higher rates. For example, imports from China are subject to 145% tariffs, while other nations, including Japan and members of the European Union, face tariffs ranging from 20% to 50%.

Collectively, these tariffs affect more than $900 billion worth of imports, representing more than 3% of U.S. GDP and constitute the largest tariff increase since World War II.

The imposition of these tariffs has already had significant negative economic consequences for the U.S. economy. There have been particularly negative developments in both the US stock market and bond market, as well as in all major international stock markets. This reflects the justified concern of investors about the immediate and long-term effects of the tariffs and the possibility of a prolonged trade war and its economic consequences.

The immediate effects on the US economy are predicted by international organizations such as the IMF and the OECD to be particularly negative. Increased inflation, slowing economic growth, if not economic recession, increased unemployment and reduced real incomes, especially for low and middle income groups.

The Trump administration claims that the tariffs will correct trade imbalances and strengthen domestic industries and the US economy. However, their negative effects, especially in the face of a likely international trade war, can only lead to the opposite result.

The increase in inflation and recession will sooner or later be transmitted internationally through global supply chains and other interdependencies of the world economy. In addition, the system of rules that has governed the world economy since World War II is being radically overturned, and the leading role of the United States in the world economy is being undermined.

The escalation of tariffs and the countermeasures from other countries increases the risk of a long and painful global recession, similar to that of the 1930s.

While some productive sectors may benefit from Trump’s tariffs, others, especially those dependent on imported raw materials and components, may face increased costs, potentially leading to job losses and reduced competitiveness. In addition, there are enormous costs for all consumers.

It has been known since the time of Adam Smith and David Ricardo, but also from modern international trade theory, that protectionist measures such as tariffs have overall negative economic effects, even if they favor some individual economic sectors or generate revenue for the government. The benefits to the protected industries and the tariff revenues are not sufficient to cover the losses to consumers and other industries, with the result that the overall impact is highly negative.

No rational economic logic other than the dogmatic logic of an outdated mercantilism justifies any optimism regarding this dead-end policy.

The only hope is that the immediate negative economic side effects of this policy will cause such a political reaction to President Trump that he will be led to reverse this policy before it is too late.

The fact that at the last minute before the deadline for the implementation of the ‘reciprocal tariffs’, President Trump suspended their implementation for 90 days on Wednesday April 9, for countries that had not retaliated with tariff increases of their own, signals perhaps the definitive reversal of this dead-end policy. Another sign is the announcement on Friday April 11 that smartphones, computers and electronics are excluded from the reciprocal tariffs imposed on China. Watch for more signals of the reversal of this dead end policy.

Link to article in Greek in the newspaper To Vima