U.S. President Donald Trump's escalating tariffs could amplify the risk of a recession for the United States and cast a shadow over the global economy, an American economist said on Monday.
The Trump administration was set to unveil sweeping new reciprocal tariffs on global trading partners on Wednesday, alongside a separate 25-percent global tariff on auto imports scheduled to take effect this week.
Professor Kimberly Clausing, a nonresident senior fellow at the Peterson Institute for International Economics, emphasized that Trump's regressive tax policy will harm U.S. consumers, exporters, production, and supply chains, while sparking retaliatory measures, as evidenced by his tariffs on Chinese imports during his first term.
"I think this is a negative policy for the United States, whether it's small or large, right? We saw, in fact, during the first Trump administration trade war, the full costs of those extra tariffs, which were mostly on Chinese products but the full costs were borne by U.S. buyers of imports, right? So it was a big shock to U.S. consumption, and it also hurt U.S. production. Very careful analysis of that trade war episodes showed that we lost more jobs in the exporting industries that were threatened with retaliation and due to supply chain disruption than were created by the protection from the tariffs," she said.
To navigate U.S. tariffs, some trading partners might redirect their trade toward other countries, Clausing noted. She added that Europe, for example, established several new trade agreements during the first Trump administration, partly as a response to the threat of trade wars with the United States.
"Europe and other countries will retaliate. That's certainly going to hurt U.S. exporters even more than the tariffs will, but the tariffs hurt them, too, of course, because U.S. exporters are also big U.S., importers, those are often the same firms. For Europe, there's a lot of new trading relationships that they can try to build, not just with each other and with the UK but with Canada and Mexico and countries throughout the world. I suspect that you know, this will also push the European Union, Japan, (South) Korea and others closer to China as they seek new trading partners that can be more reliable than the Trump administration at this particular time," she explained.
The economist warned that this tariff escalation could trigger a recession in the United States and overshadow the global economy.
"I think that if the tariffs end up being quite broad, we are going to see a big impact right away. But I think the big impact is mostly going to come in the form of recessionary headwinds for the United States, because this is such a large shock, it's such a large tax increase and it's such a large supply chain disruption that's going to reduce U.S. demand. In addition to the tariffs reducing U.S. demand, that puts a big cloud over the whole world economy. Because the United States is a large economy that's going to have a big impact," she said.
Trump tariffs could spark US recession, stall global economy: economist
