US President Donald Trump’s announcement of new tariffs on almost every country has sent shockwaves through global markets, leaving investors reeling. The sell-off, which began in after-hours trading, saw the market plummet due to investors’ failure to anticipate Trump’s protectionist scheme.
Trump’s tariff plan, which applies unilaterally and inflicts crushingly high tariffs not only on China but also on Vietnam, Bangladesh, the European Union, and Japan, is unprecedented in modern times. The reality is that these tariffs are far higher than what other countries impose on the US, laying the groundwork for retaliation and potentially sparking a trade war.
Experts argue that investors’ willingness to believe that Trump would back down from his protectionist impulses was a willful blindness to who he is and what matters to him. Trump’s view on trade has been strikingly consistent for almost 40 years, with his position being rooted in the idea that trade deficits are evidence that America is being “ripped off.”
The administration’s calculation of tariff rates used by Trump is also questionable. The formula, which divides the US trade deficit with a country by its imports from that country, has been criticized as silly and deceptive. This approach ignores the complex reasons behind trade deficits and assumes that they exist solely due to unfair trade practices.
Trump’s real goal is not to eliminate trade barriers but to eliminate all bilateral trade deficits, which he believes would prove that America is not being “ripped off.” However, this approach has been met with skepticism by economists, who argue that it would be an economic disaster for the US to try to eliminate all trade deficits.
The consequences of Trump’s actions will be felt far beyond the market, and investors are already paying the price for believing otherwise. The global economy is now facing a potentially devastating trade war, and its impact will be felt for years to come.
Source: https://www.theatlantic.com/ideas/archive/2025/04/wall-street-trump-tariffs/682304