KARACHI:
A protectionist policy adopted by US President Donald Trump is gradually taking a heavy toll on the global economy, prompting a strong backlash from the allies of Washington and coercing US consumers to take to streets against a potential rise in inflation.
The imposition of tariffs by the Trump administration on key trading partners has triggered a strong reaction from America’s allies in North America and Europe, particularly Canada and Germany, while economists warn the move could have widespread repercussions for the global economy. The US economy, which was resting on its laurels, is now about to shrink, causing embarrassment to businesspeople.
The Economist has reported that American consumer confidence fell sharply in February, in part because of expectations that inflation will rise over the coming months and increasing pessimism about the economy. Data suggests that Trump’s trade war and his imposition of tariffs on even friendly trading partners is starting to worry consumers.
Five years ago, Elon Musk warned that Tesla’s stock could be “crushed like a souffle under a sledgehammer”. The carmaker’s share price has indeed tumbled this year, wiping out most of the gains it made after Trump’s victory in November.
Its long-awaited update of its autopilot software in China this week left investors unimpressed. And Europeans are turning away from its vehicles in droves. Tesla’s year-on-year sales fell by half in Britain and the EU in January, according to the European Automobile Manufacturers’ Association. America’s president thinks he can pursue the national interest most effectively through hyperactive transactions. Everything is up for grabs: territory, technology, minerals and more. But these mafia-like rules do not suit the US. The wars in Ukraine and Gaza will test Trump’s self-interested approach to diplomacy.
The divergence between Germany’s economy and its big businesses is not that mysterious. DAX companies generate around 80% of their revenues abroad, including 24% in go-getting America. SAP, a business software firm with a market value of $350 billion, is worth more than half as much as Mercedes-Benz, Porsche, BMW and Volkswagen put together.
On top of that, Canadian Prime Minister Justin Trudeau recently warned about the potential imposition of tariffs by the Trump administration and said that Canada would have a quick and strong response. He would take initiatives and knuckle down to work on everything necessary to avoid unjustified tariffs being imposed on Canada.
Trump has decided to move forward with the imposition of tariffs on both Canada and Mexico, starting March 4. Moreover, reciprocal tariffs are set to continue with full force from April 2.
Leading regional expert and Centre for South Asia and International Studies Islamabad Executive Director Dr Mehmoodul Hassan Khan said realistically, Trump’s high tariffs have unique patterns and it is not just an act of madness, which has rattled the geopolitical map and geo-strategic landscape of the world, pushing for new alliances and partnerships. It has badly affected the global geo-economics, creating economic turmoil, sharply pushing down growth and sending inflation soaring around the world. “EU exports to the US will drop by between 15% and 17%, leading to a significant 0.4% contraction in the size of the EU economy, while the American GDP will shrink by 0.17% and the expected tit-for-tat tariffs by the EU will double the economic damage and push inflation up by 1.5 percentage points even in the US, badly hurting its common people, consumers and poor,” he said.
“German manufacturing exports to the US will be the worst hit, with exports dropping by almost 20% for the German car industry.” It is predicted that Germany, Europe’s largest economy, will likely suffer another two years of recession. Ultimately, its GDP can shrink by 0.1% during 2025 and 0.4% in 2026. The EU, as a whole, can suffer a similar decline this year and 0.3% contraction in 2026.
The impact on the 2,100 German companies that have local branches in Mexico will be more direct, for obvious reasons. The direct impact on German consumer price inflation is likely to remain limited, but energy prices will become more volatile. The international dreams of qualitative life, economic sustainability and people-friendly policies will be further diminished, causing high unemployment, poverty and social discrimination. Thus, Trump’s America First policy and protectionism is a killing machine for the international economy.
Trump’s euphoria of high and reciprocal tariffs has produced chaos, uncertainty and massive disruption in the international trading system, supply chains and engagements. The latest Oval Office episode with the Ukrainian president is the demise of international diplomacy and destruction of peaceful dialogue and development.
The common people and consumers in the US are confronting the cumulative follies of Trump. Inflation is gaining momentum, making the lives of people uneasy. There is a surge in the cost of construction material and food items.
US policymakers must start collaborative efforts for constructive competition and cooperation by dismantling policies of so-called national security, economic protectionism and imposition of unilateral sanctions against others.
Trump as the “New Tariffs King” is forcefully pushing the international economy towards the 19th century, modeling his policies on those imposed by former US president William McKinley (1843-1901), which has serious socio-economic, geopolitical and geostrategic spillover repercussions for international trade, manufacturing development, global supply chains and even international communities.
The writer is a staff correspondent