By turning trade into an oversimplistic tit-for-tat game, Washington is dismantling a global trade system based on efficiency, specialization and mutual benefit and hurting both the U.S. economy and the global economy at large.
BEIJING, April 3 (Xinhua) — Once again, the administration of U.S. President Donald Trump has shown the world that its trade policies are built on a flawed premise. While the “charge what they charge us” mantra may sound fair, it blatantly ignores economic realities.
Amid widespread opposition, Trump on Wednesday signed an executive order on the so-called “reciprocal tariffs,” imposing a 10-percent “minimum baseline tariff” and higher rates on certain trading partners.
By turning trade into an oversimplistic tit-for-tat game, Washington is dismantling a global trade system based on efficiency, specialization and mutual benefit and hurting both the U.S. economy and the global economy at large.
The idea of reciprocal tariffs is particularly misguided. The principle of comparative advantage allows countries to focus on what they do best and trade for the rest. Ignoring this leads to economic inefficiencies.
Take coffee as an example. The United States imports it tariff-free because it produces very little. Brazil, the world’s largest coffee exporter, imposes a 9 percent tariff on imports. If the United States matched that tariff, it wouldn’t boost American coffee production; it would just raise prices for consumers and hurt businesses. The same logic applies to countless other products.
The Trump administration’s tariff grievances ignore history. Rather than being arbitrarily imposed by foreign governments, the foreign tariffs were the results of painstaking negotiations known as the Uruguay Round, which shaped modern trade rules and established the principle of “most favored nation” treatment.
This means that countries apply the same tariffs to all trading partners, rather than targeting any one nation specifically. The Trump administration’s claim that these tariffs are unfairly aimed at the United States simply does not hold up.
During the Uruguay Round negotiations, the global trade system was designed to accommodate development gaps. Emerging economies were allowed higher tariffs to nurture industries, while advanced economies would benefit from lower trade barriers that promote efficiency and competition. Bulldozing this structure will not help U.S. firms. It will just destabilize global trade by instigating trade conflicts on a global scale.
Ironically, the clearest victims of Trump’s protectionism are likely Americans themselves. Despite promises to revive manufacturing, protectionist measures have entrenched inefficiencies and diminished competitiveness.
What has Trump’s tariff-centered trade policy achieved so far? The U.S. trade deficit has only worsened, soaring to 1.07 trillion U.S. dollars in 2024, up from 870 billion dollars in 2018 when Trump’s trade war began. Research from the Federal Reserve Bank of New York found that tariffs have reduced U.S. economic well-being by 3 percent, harming businesses and consumers alike. The steel industry, the poster child of Trump’s tariffs, has seen employment levels stagnate. Even in 2023, steel jobs remained below their 2018 levels.
Even worse, despite Trump’s imposition of 25 percent tariffs on steel imports in 2018, productivity in the U.S. steel sector, measured by output per hour, has declined by 32 percent over eight years. U.S. steel-consuming businesses, employing 45 times more workers than the steel producers, pay roughly 75 percent higher steel prices than their global competitors, according to a recent Council on Foreign Relations report.
Washington’s tariff obsession is not only failing to revive U.S. industries, but also setting them back. Even more troubling for American policymakers, this approach risks leaving the United States sidelined as the global economy moves forward without it.■
