The Independent Uganda: You get the Truth we Pay the Price
COMMENT | Maya Majueran | U.S. President Donald Trump has instructed his economic advisors to formulate comprehensive plans for implementing “reciprocal tariffs” on nations that tax U.S. imports, as part of a broader strategy to address what the administration perceives as unfair trade practices.
Such measures, however, carry significant risks as they could escalate trade tensions and provoke retaliatory responses from other nations, disrupting global trade dynamics and increasing the likelihood of a trade war.
A cycle of tit-for-tat tariffs could destabilize international markets, hinder economic cooperation, and weaken global supply chains. Additionally, these actions could strain diplomatic relationships, as other countries may perceive them as hostile or unfair.
Over time, these policies could fragment global markets, reduce investment confidence, and harm businesses and consumers across multiple economies, ultimately undermining the stability and interconnectedness of global trade.
The implementation of “reciprocal tariffs” could also drive up costs for imported goods in the United States. Companies and distributors often pass the added tax burden onto buyers, such as manufacturers or retailers, to protect their profit margins. These buyers, in turn, may raise prices for consumers and businesses that rely on these imports.
In today’s interconnected global economy, where products are often assembled using parts from multiple countries, undue tariffs disrupt global value chains by increasing the cost of imported components. This raises overall production costs, making U.S. products more expensive and less competitive in global markets.
Furthermore, other countries may retaliate by imposing tariffs on U.S. exports, raising costs abroad and reducing demand for U.S. goods, which further harms U.S. exporters. Such countermeasures can ripple through supply chains and exacerbate economic challenges.
Domestically, the rise in import prices could contribute to inflation, further complicating efforts by policymakers, including the Federal Reserve, to manage economic stability.
Rising inflation in the United States may also compel the Fed to increase interest rates, which could have significant ripple effects on other countries, particularly those that rely on the U.S. dollar for trade or have dollar-denominated loans, and increase financial strain on these economies.
Government emergency relief payments to farmers surged to historic levels during Trump’s first term in office, largely due to the economic fallout from 2018 tariffs. Those tariffs, imposed on a wide range of imported goods, prompted retaliatory measures from other countries, many of which targeted U.S. agricultural exports.
As a result, U.S. farmers faced significant losses in international markets, leading to a sharp decline in demand for their products. To mitigate the financial strain on the agricultural sector, the U.S. government allocated billions of dollars in emergency aid, marking one of the largest federal support programs for farmers in recent history.
At the same time, some countries reacted by increasing their production of goods they previously imported from the United States, reducing their reliance on U.S. products, and creating new competition for U.S. manufacturers in global markets.
U.S. “reciprocal tariffs” are unlikely to benefit the United States or other developed countries, as they will struggle to manufacture goods at competitive prices due to higher production costs. Meanwhile, as demand grows in developing markets, these countries may increase trade among themselves, reducing their reliance on Western markets. This shift could also accelerate the use of local currencies in international trade, challenging the dominance of the U.S. dollar in global commerce.
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Editor’s note: Maya Majueran currently serves as a director of BRISL, an independent & pioneering Sri Lankan-led organization with strong expertise in BRI advice and support.
The views expressed in this article are those of the author’s and do not necessarily reflect the positions of Xinhua News Agency.
