President-elect Donald Trump views tariffs as a powerful tool to pressure other nations to address issues such as drug trafficking and illegal immigration. He has used tariffs to negotiate deals with countries like Canada and Japan, often labeling them as “win-win” agreements.
Using tariffs as a bargaining chip can be effective, but it also carries significant risks. Economists warn that the threat of tariffs can hurt the US economy and the stock market, depressing business investment. Moreover, relying on tariffs to solve complex problems may lead to a loss of trust from friends and allies.
Tariffs have also been used to target national security weaknesses, such as the concentration of critical minerals mining and refining capacity in China. However, experts caution that this justification can be easily abused. Additionally, Trump’s attempts to use broad tariffs to protect factory jobs are seen as short-sighted, as they ultimately hurt consumers.
History shows that relying on tariffs to address global issues can lead to a full-blown trade war, as seen in the Smoot-Hawley tariffs of 1930 and ensuing retaliation. This can reignite inflation, spook the stock market, and have devastating consequences for the economy.
While Trump’s tariff policy may yield short-term gains, it poses significant risks that could undermine his long-term goals. Economists urge caution and a more thoughtful approach to using tariffs as a tool of foreign policy.
Source: https://edition.cnn.com/2024/12/10/business/tariffs-trump-trade-china/index.html