Reference News Network, October 14 report - The website of the British magazine "The Economist" published an article titled "Trump's 'Fortress Economy' Is Beginning to Harm the United States" on October 9. Excerpts are as follows:

President Donald Trump is building walls brick by brick for the world's largest economy. As the United States continues to raise tariff barriers against all other countries, the drawbridge is also raised, making it increasingly difficult for immigrants to enter the United States. President Trump hopes to turn the United States into a fortress that can resist foreign "invasions." But in fact, he is pushing the United States further away from the goods and talents that once made its economy the envy of the world. Now, the damage caused by Trump's policies has begun to show; once the damage is done, it cannot be easily reversed.

Stock Market Prosperity Is Only Skin Deep

However, investors have a different view. In the six months since "Liberation Day" (the day when Trump imposed tariffs on American trade partners), financial markets have shifted from panic to euphoria. Other areas show mixed results: because U.S. import companies have borne most of the tariff impact, domestic inflation has only slightly increased; although the interruption of immigration inflows has led to a stagnation in employment growth, the U.S. economy is still expected to grow by 1.5% to 2% in 2025.

The resilience of the U.S. economy is partly due to the average tariff level not reaching the levels people feared. On one hand, some tariff measures have been canceled, and on the other hand, trade flows are adjusting rapidly.

In addition, for President Trump, it is fortunate that the U.S. is currently experiencing an extraordinary stock market boom, which stems from optimism about artificial intelligence. Since hitting a low point in April, the S&P 500 index has risen 40%; the current cyclically adjusted price-to-earnings ratio has exceeded 40 times, approaching the record set during the internet bubble era. Wealthy investors are increasing their consumption, providing support for economic growth.

Inflation Is About to Worsen

However, the economy cannot indefinitely avoid the costs of isolation, and these costs will only increase over time. First, the stock market cannot maintain such a rapid rise forever; the higher it goes, the greater the risk of a crash, and at that time, the wealth effect will completely reverse. Second, the damage caused by current tariffs is beginning to show. A sharp decline in immigration inflows has had a huge impact on the economy, but this impact has not yet been fully recognized. Between 2000 and 2020, the annual net immigration to the United States was 1 million people; during President Joe Biden's term, this number rose to 2.5 million per year. However, in 2025, the U.S. may see zero growth or negative growth in net immigration for the first time since the Great Depression.

The most pressing issue at present is the worsening of inflation. Our tracking data shows that Trump's tariff measures are currently pushing up consumer prices by 0.3 percentage points. This increase may continue to widen in the coming months and reach a peak around the end of the year. Economists at Goldman Sachs found that the longer the tariffs are in place, the more likely their costs will be passed on to consumers. This may be related to the president's capricious policy-making: companies will wait until they are forced to raise prices before taking action; and once they decide to raise prices, domestic producers who are protected from competition will follow suit. These effects will soon push core inflation close to 3.5%. Currently, the prices of imported goods such as clothing, electronics, and home appliances have already risen above normal trends, and people, especially poorer families, have already felt this clearly.

Long-Term Damage Has Far-Reaching Effects

The real damage will come in the long term. The U.S. accounts for only 15% of the final demand for global goods. If the U.S. continues to raise the drawbridge, the global economic system will gradually integrate without U.S. participation. Canadian Prime Minister Mark Carney is working to strengthen ties between the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the European Union. Although the U.S. economy is large, even if it withdraws from global trade, it will not face an economic disaster. But over time, tariffs will erode its competitiveness and economic influence, especially when its allies become more deeply integrated with China. Global investors are becoming increasingly cautious about the dollar.

Reduced immigration will also cause damage. Trump's restrictions on immigration have even affected high-skilled workers, along with his reckless deportation plans and crackdowns on universities, Trump is sending a signal to top global talent that the U.S. does not welcome them.

This will ultimately hit the U.S. the hardest, because the benefits brought by high-skilled immigrants are significant. A study pointed out that 30% to 50% of productivity growth in the U.S. between 1990 and 2010 should be attributed to high-skilled immigrants. When the U.S. closes its doors to immigrant talent, it is also giving up one of the key elements of its own success.

The "fortifications" surrounding the U.S. economy will not be easily dismantled. Since other countries have not raised tariffs, the U.S. must unilaterally lower its own tariffs to remove the barriers. However, domestic companies accustomed to trade protection will certainly lobby the government to maintain the current tariffs. At the same time, the belief that "the U.S. is a place where one can realize self-value" cannot be rebuilt overnight. The U.S. once boasted of being a "city on a hill," but as high walls keep rising, it looks more like an isolated fortress. The longer this situation persists, the more likely the world will continue to move forward without U.S. participation. (Translated by Yang Xuele)

Original: https://www.toutiao.com/article/7560997175518364194/

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