[Source / Observer Network, Wang Hui] At 2 o'clock local time, Trump unveiled his "tariff card" at the White House, starting from a minimum of 10%, affecting dozens of countries and regions, including his allies.

According to Trump's announced new policy, China's "reciprocal tariff" rate will reach 34%, Vietnam 46%, Cambodia 49%, Thailand 36%, Indonesia 32%, India 26%, Japan 24%, South Korea 25%, EU 20%, Switzerland 31%, South Africa 30%, Philippines and Israel 17%...

Such a widespread impact has opened a new chapter in the global trade war.

"When Trump was in his first term, this trend of initiating a trade war had already shown up, but at that time, his political foundation was not solid enough, so he ultimately did not ignite the fire of the trade war," told the Observer Network by Lü Xiang, an expert on American issues from the Chinese Academy of Social Sciences. In this presidential term, Trump believes his power is very consolidated. Although there may be three or four people within the party who will oppose him, it is insufficient to constrain him through Congress. His power is actually uncontested, and he can do as he pleases.

America's widespread imposition of tariffs globally can be seen as a behavior of isolating itself from the global free trade. "Trump may think that he can achieve America's 'self-reliance' through tariffs, establishing an internal circulation system, from shoes and socks to missiles, all made domestically," said Lü Xiang. Such thinking is obviously unrealistic, and America's current comprehensive tariff war will certainly face countermeasures from various countries. These countermeasures may not be equal, but they will still be intense. This means that America's existing exports will suffer a strong impact, thereby affecting its GDP and economic growth.

Most importantly, "I believe that non-American countries will unite. Everyone will sit together to consider how to minimize the impact and how to digest the dependence on the U.S. Next, non-American countries will naturally form a community, strengthening their trade with each other, and the trade between non-American countries will grow explosively this year."

Trump claimed that April 2nd is America's "Liberation Day." Screenshot of the tweet.

"Trump's logic: As long as you lose more than me, I win."

The research report from Zhongjin stated that the calculation shows that if these tariffs are fully implemented, the effective tariff rate in the U.S. could rise sharply by 22.7 percentage points from 2.4% in 2024 to 25.1%, which would exceed the tariff level after the implementation of the Smoot-Hawley Tariff Act in 1930.

The American think tank Cato Institute pointed out that the Smoot-Hawley Tariff Act "triggered a global trade war and deepened the Great Depression at that time."

Antonio Fatas, professor of economics at INSEAD, believes that reciprocal tariffs bring more uncertainty and may lead to a global recession. "We are becoming a world where everyone gets worse because it becomes less efficient."

Olu Sonola, head of U.S. economic research at Fitch Ratings, also said: "This is an event that changes the game, not only for the U.S. economy, but for the global economy. Many countries will fall into recession."

"This may be the greatest shock to the global economic landscape since the end of the Cold War, and its duration may be long, but Trump does not care about the impact of these tariff policies on other countries," said Lü Xiang. In his view, regardless of whether other countries retaliate, as long as the losses of other countries are greater than his losses, he profits.

"In other words, if he loses 10 dollars, and others lose 20 dollars, he considers himself to have profited. This is his basic idea. As long as you lose more than me, I win. Trump still has confidence in winning, but I think this confidence is blind, because if the U.S. were truly isolated by the world, many domestic links in the U.S. would become chaotic."

Lü Xiang analyzed that, for example, America's shipbuilding industry has disappeared because the supporting industries have disappeared. If Trump methodically restored these supporting industries, it might be possible to partially strengthen some key strategic industries, but his current approach cannot achieve this. Once the current policies are implemented, they will be an irreversible blow to the domestic industrial chain. The already fragmented supply chains will become even more fragmented.

Local time on April 2, 2025, at the White House, Trump holds a report on trade barriers and delivers a speech. Visual China.

What else can limit Trump?

Lü Xiang believes that future limitations on Trump will still be domestic factors in the U.S., especially the stock market and inflation.

Trump chose to announce the "reciprocal tariff" at a time when the U.S. stock market was closed. After the announcement of the new policy, futures of U.S. stocks plummeted, and tech stocks also suffered heavy blows in after-hours trading. As of publication, Apple fell 7.14%, Tesla dropped 8.01%, Amazon fell 6.13%, Nvidia fell 5.70%, Microsoft fell 2.92%, Google fell 3.48%, Facebook fell 4.78%. The combined market value of America's seven major tech giants evaporated by over $700 billion (approximately RMB 5 trillion).

"We have already seen the violent reaction of the stock market. Trump deliberately chose to announce his decision after the market was closed, perhaps not wanting to see the immediate collapse of the stock market after he spoke. However, the subsequent crash is predictable, unless he says something flexible," said Lü Xiang.

He believes that the stock market is an indispensable force for the U.S., as it is the reservoir of American funds. Most Americans' insurance and pensions are closely related to the stock market. Therefore, Trump cannot afford to let the stock market collapse; he must find ways to boost it.

"However, if the U.S. stock market really votes with its feet, then Trump's next move may be further capital controls because without such controls, American capital will flow out in large quantities. Therefore, there may be relatively rapid capital flight now, which is a development we can observe," Lü Xiang analyzed.

In addition to the stock market, inflation is another major challenge Trump will face.

The Zhongjin research report pointed out that reciprocal tariffs could increase uncertainty and market concerns and exacerbate the risk of stagflation in the U.S. economy. Calculations show that tariffs could push up the U.S. PCE (Personal Consumption Expenditure Price Index) inflation by 1.9 percentage points and reduce actual GDP growth by 1.3 percentage points, although they may also bring in over $700 billion in fiscal revenue. Facing the risk of stagflation, the Federal Reserve can only choose to wait and see, making it unlikely to cut interest rates in the short term. This will further increase the risk of economic downturn and add pressure for downward adjustment in the market.

Lü Xiang believes that inflation will definitely show up in the U.S. April data, and once inflation occurs, it will provoke widespread public resistance. "This time, it is different from the inflation after 2020. Back then, there was an emergency situation due to the pandemic, and the government issued more bonds and used cash to stimulate the economy, which had some justification. Now it is entirely artificial inflation, and I think the public's reaction will be very intense, followed by a decline in investment confidence and consumer confidence. Many people expect that not only will the U.S. economy experience negative growth in the first quarter, but the next two or three quarters are likely to continue experiencing negative growth."

In fact, Trump had already begun to inoculate against this before. He said that tariffs would bring some "small disturbances." Treasury Secretary Bostin also warned that the U.S. economy would slow down because it needed to go through a detox period from dependency on government spending.

"This detox period will be more severe than they imagine because of the artificially created consecutive recessions, and the public's reaction will be strong," Lü Xiang said. Under such trade restriction conditions, global demand for the dollar will certainly drop significantly, and the status of the dollar as the world reserve currency will also decrease significantly. Can the U.S. continue to harvest the world through issuing treasury bonds? I don't think so.

In addition, "Trump believes that tariffs are a panacea that can cure any disease. He hopes that tariffs can not only bring industries back to the U.S., but also directly increase fiscal revenue. However, under the current level of tariffs, U.S. trade will shrink significantly. In this case, no matter how high the tariffs are, the final revenue will be minimal, and it will not compensate for other economic losses. I think the ultimate impact on the U.S. will be greater," Lü Xiang added.

Original source: https://www.toutiao.com/article/7489008418166948363/

Disclaimer: This article solely represents the author's viewpoint. You are welcome to express your attitude by clicking the "Like/Dislike" buttons below.