Cairo: Hani Kamal El-Din
The United States’ recent trade policies have become a major driver of economic instability worldwide. Actions such as the imposition of tariffs and the introduction of trade barriers have had adverse effects on the global economy, threatening to deepen the global recession and straining trade relations between major nations. This report examines the ramifications of these policies through economic analyses and expert opinions, while also forecasting the future under these policies.
Tariffs and Their Impact on the Global Economy:
As part of a rapidly advancing trade policy, the U.S. government announced new “mutual tariff” measures, with rates increasing to 10% at a minimum. This decision sparked a series of harsh reactions across global financial markets. Stock markets in the U.S. and abroad plummeted in response to these announcements, signaling widespread concern over the long-term negative effects of such policies.
The U.S. Economy’s Response:
Major financial institutions, including the China International Capital Corporation (CICC), have projected that these policies will significantly increase inflation in the U.S., which will, in turn, erode consumers’ purchasing power. Moreover, such measures are expected to slow the growth of the U.S. GDP by as much as 1.3%, deepening the economic crisis.
The Organization for Economic Cooperation and Development (OECD) has revised its growth forecast for the U.S., lowering the 2025 growth estimate to just 2.2%, down from 2.8% in 2024. This downward adjustment highlights the profound impact that the U.S. trade policies are having on economic stability.
Global Trade: A Threat to International Supply Chains:
With escalating tensions from the U.S. trade policies, analysts warn that these actions are likely to disrupt global supply chains. Such disruptions will lead to shortages of essential goods and inflate costs for consumers. The United Nations Conference on Trade and Development (UNCTAD) has raised alarms about the long-term consequences of protectionist policies, predicting that global trade will face increasing challenges due to the U.S. tariffs and trade restrictions.
In its analysis, Fitch Ratings projects a decline in global growth, revising the forecast from 2.9% in 2024 to just 2.3% in 2025, and further down to 2.2% by 2026. These predictions signal the deepening economic slowdown resulting from U.S. trade measures.
Protectionism: A Blow to Global Economic Principles:
The current U.S. trade policies stand in stark contrast to the foundational principles of international trade. The global trading system was built on the ideals of equal treatment, multilateral cooperation, and resolving trade disputes through dialogue and mutual agreements. However, the U.S.’s current protectionist stance threatens to undermine this system.
The World Trade Organization (WTO) President Ngozi Okonjo-Iweala remarked that the U.S. has been “the biggest winner” in global trade, despite framing itself as a victim. This is evidenced by the U.S.’s large surplus in services trade with numerous major economies, suggesting that the tariffs being imposed are more politically motivated than economically necessary.
Economic Experts: Criticism and Warnings:
The U.S. policy of imposing reciprocal tariffs has faced strong criticism from economists worldwide. Many experts believe that these measures ultimately harm the U.S. economy, stifling global trade and deterring investment. Martin Wolf, an economist at the Financial Times, described the policy as “unsustainable” and “disruptive,” warning that the long-term consequences could be detrimental to both the U.S. and the global economy.
Chinese economic analyst Zhao Qichuan noted that these tariffs could increase production costs in the U.S., placing added pressure on American companies that rely on imports. He argued that the U.S. government is using these tariffs as negotiation tools in trade talks, but such an approach could backfire in the long run.
Future Outlook: Is the U.S. on the Right Track?
In light of these policies, the United States appears to be on an economically risky path. Pursuing an isolationist trade approach could lead to further trade tensions with allies and major partners, potentially escalating into more trade wars in the future.
American economist Jeffrey Sachs characterized these trade policies as “economically incorrect” and “geopolitically dangerous,” asserting that the U.S. must shift towards a model that encourages cooperation and integration with other nations rather than division and isolation.
The United States’ current trade policies are setting the stage for an unprecedented economic challenge. From rising inflation to a slowdown in global growth, the effects of these policies are far-reaching. To avoid further economic deterioration, the U.S. must reconsider its approach and recognize that multilateral cooperation is the best path forward to ensure global economic stability.
