“Day of Liberation” or liberation from Trump?
US President Donald Trump sees “rip-off artists, exploiters and rapists” everywhere in international trade, and the US is the victim.
He considers the US trade deficits with other countries – such as Germany or China – to be a national disgrace that he wants to end with his brutal tariff policy. Trump’s accusation: other countries are enriching themselves at the expense of the US. In doing so, however, he is destroying the world trade order that has existed so far, which the US itself essentially created. This order brought growth, prosperity and security to millions of people in many countries – including the US.
Will April 2, 2025, which Trump has proclaimed “Day of Liberation” in the U.S., become a day of liberation from Trump? Since that day, criticism of Trump in the U.S. has been stronger than ever. Stock prices are falling and leading U.S. scientists are protesting against Trump’s tariff policy. This is what Trump’s tariff club actually looks like: 10 percent is standard, but 20 percent is already in place for Europe, more than 30 percent for China and almost 50 percent for Vietnam. Trump’s simple reasoning: we will treat our exploiters in the future as they have treated us so far. Oh, those poor Americans! What does this Black Wednesday mean for world trade?
Leading economists are asking: Who has been ripping off whom so far?
Among international economists, there are a few insights that I learned during my studies. They come from David Ricardo, a British economist of the early 19th century (1772 to 1823). His most important insight: free trade increases the prosperity of all participating countries and thus their citizens. In economics, this is the theory of comparative cost advantages. This means that each country should specialize in the production and export of those goods that it can produce with the lowest absolute cost disadvantage (relative comparative cost advantage). If tariffs are reduced, it helps all countries, companies and their people. If tariffs are increased, it harms all countries, companies and their people. This means that each country specializes in the products that it can produce most cheaply for everyone. In Germany, these are petrol and diesel cars, in the USA internet giants, in China photovoltaic systems and e-cars. These products are then exported worldwide and become cheaper for everyone. It is easy to see that higher tariffs only harm this global trade.
Trump is doing most damage to his own country, which depends on imports for many products. And Trump is doing most damage to his own slogan “Make America great again”. Because prices in the US are rising and so is inflation.
Why doesn’t Donald Trump know this? Probably because he has never heard or read anything about David Ricardo. And he is considered to be resistant to advice. The television entertainer and dealer in the White House probably has no time to read and think. According to almost all US economists, Trump’s tariff policy will hit Trump voters the hardest, because the socially weak will feel rising prices and inflation most acutely. Trump is making Americans poorer. Perhaps the Chinese will benefit the most from this. They can now present themselves as champions of free world trade. The German magazine “SPIEGEL” is already prophesying “Evil America, good China” (SPIEGEL March 5, 2025).
On the very first day of the new tariff policy, important stocks in the USA fell significantly. The trade war that Trump started will only know losers – everyone always loses a trade war. China has already announced 34 percent counter-tariffs on all products from the USA. Trump had imposed tariffs on all Chinese products at this level. In doing so, he wanted to force foreign companies to relocate their industrial jobs to the USA. It is very doubtful whether this will work.
April 2, 2025 may well be the decisive day of the ultimate defeat of a president who spoke of a “day of liberation” but defeated himself. In the worst case, however, Trump’s tariff rage has caused a global economic crisis, with higher unemployment, higher inflation and falling corporate profits worldwide.
