Recently much of the talk has been about the controversial tariffs that President Trump has placed on every corner of the globe. Today, though, I would like to discuss how tariffs could impact different economic and financial sectors of the economy.
The stock market is a major indicator of economic progress and confidence. Currently, confidence in the stock market isn’t very high, as seen with the ups and downs of the last few weeks on the market. It also seems that investors are not optimistic about the tariffs, as the market fell sharply when the administration announced the tariffs and recovered somewhat once most of the tariffs were paused.
One of the biggest goals of the tariffs is to return manufacturing to the United States. But that goal isn’t entirely realistic because the cost would drive the prices of goods up greatly. Reports have said an iPhone made in the United States would cost hundreds of dollars more if manufactured in America.
Tariffs could also lead to US isolation on the world stage as alliances shift. The process of US isolation has already started as Europe and Asia are coming together to form new agreements. For example, China, South Korea, and Japan recently had a meeting to discuss a partnership. A partnership between China, on the one hand, and Japan and South Korea, on the other, is not something that anyone would have previously expected).
Looking at tariffs historically, we can see how tariffs affected our own country in the past. The Nullification Crisis during the Jacksonian era increased tensions between the North and the South and helped fuel the fire that led to the American Civil War. The tariffs helped protect the North’s industry while hurting the South, which relied on imports, and caused a debate about federal and state power. Another historical example is the Great Depression. Shortly after the market crashed, the United States imposed tariffs against the rest of the world in order to protect American goods, but it backfired and caused a decrease in international trade, which may have made the global depression worse.
One of Trump’s major goals with these tariffs is the negotiation of better trade deals with other countries. While this could happen, the tariffs could also backfire. That would leave the United States economically and politically isolated. Countries that were once close to us might be reluctant to partner with the United States.
