How do Donald Trump's customs policy and protectionism influence the global economy?
As soon as Donald Trump is in office, he wants to implement his motto “Make America Great Again” immediately. His most popular means of this: tariffs, tariffs, and again tariffs. With this apparently universal means of Trump's foreign policy, he tries to achieve economic and political goals equally. This week, Trump has proven that he does not stop at the implementation of these goals by introducing tariffs. The latest announcement to impose extensive tariffs on imports from Canada, Mexico and China shocked the stock exchanges worldwide.
Why does Trump seem so obsessed with tariffs? To understand this, let us first look at Trump's argument. This seems to have a certain logic: there is a huge trade deficit in all three countries. This means that the USA imports – measured in US dollars – far more goods from these countries than they export to them.
If the United States now raises wide -ranging tariffs on imports from these countries, imports are more expensive to products from other countries or from the USA itself, which in comparison seem cheaper. The associated hope is that American consumers and companies increasingly access American products or that companies themselves shift their production to the USA in order to avoid import duties.
If the Americans continue to go to the products from Canada, Mexico and China despite the tariffs, then this is good for the American state budget, because the tariffs flow as income.
Either way – this is Trump's logic – the matter is good for the United States: either more is produced in the USA or the state is earned and can finance other measures through the additional funds, such as Trump's idea that To abolish income tax and instead to finance them by tariffs. The catch, Donald Trump obviously does not include the complex effects of his calculation, which could have the planned massive interventions in trading policy, not only for the USA, but for the entire global economy.
What are the advantages and disadvantages of protectionism in economic policy?
The idea of protecting the domestic economy through tariffs is ready hundreds of years. The Sonnenkönig Ludwig of the XIV in the 17th century tried to support France's rise to international economic power through tariffs. The prevailing economic view – the so -called mercantilism – aimed to export as many goods as possible and import as little as possible in order to finance fleet, army and the magnificent royal court through the expected rising state revenue.
The fact that this logic of a world economy based on protectionism cannot be used if it is used by many countries, the contemporaries already opened up. In his famous book “The Prosperity of the Nations” in 1776, Adam Smith already showed that mercantilistic trade policy leads to customs spirals and trade wars and ultimately all losing all if goods are artificially more expensive and international trade is thus decreasing.
As a result, the Mercantilistic economic view was replaced by the idea of free trade. Free trade has become the prevailing dogma of foreign trade since the 19th century and it was the guiding principle when the world trade organization (WTO) was founded in the Golden Age of Globalization in the 1990s. The idea behind it was that ultimately harmful interventions in free world trade should be avoided by a rule -based trade policy. If there is a dispute, the WTO can be called to settle.
The result: an unprecedented global chain of economic areas, other bilateral, regional and international free trade agreements – from which the German economy, especially also benefited massively – and a long phase of steadily growing global economy.
Of course, free trade has also caused problems: In the absence of tariffs, nations find it difficult to establish new industry in their own country if cheap imports from other countries make it impossible for local industry to develop competitive products themselves. However, in order to prevent such “dumping”, the WTO rules have designed to contain such unfair trading practices and instead promote fair world trade. The underlying principle: a rule -based trading policy based on fairness and the same opportunities instead of protectionism is better for everyone in the long run.
What role does complexity in economic policy play for tariffs, as is now introduced by Donald Trump?
A look at the history of world trade between free trade and protectionism shows that effective trading policy must necessarily consider the complex reactions that can be triggered by the introduction of tariffs. If there is a violation, there may be trade wars, which – that also showed the story – may be able to degenerate into actual wars, and in any case cause a lot of economic damage.
But not only the obviously threatening counter -reactions probably make Donald Trump's politics in the threat of the invoice, but possibly the duties introduced itself. What Trump does not seem to take into account is that the American economy itself is globally networked. Parts of American products come from abroad, they are further assembled into larger components in the United States and exported again before they may come back to the USA as finished products.
For example, the global supply chain of the American computer manufacturer Apple consists of 43 countries, between which there are complex and mutual import and export relationships in order to create the desires from iPhone to MacBook and to provide American and international consumers.
Accordingly, the well -known complexity economist César Hidalgo recently pointed out the unintentional consequences that the Trump's tariffs could have and could develop into a double -edged sword. Due to the complex integration of the supply chains and the multiple export and import of parts and components, the production of certain goods through tariffs could significantly more expensive and thus lead to the shift chains.
However, it is far from being agreed that the supply chains will then be postponed to the USA. It may also be that the entire production is outsourced to reduce costs. It could also be that American suppliers for products that are manufactured abroad are displaced by other suppliers, e.g. from China. Or it can happen that foreign producers are looking for other sales markets or American components, as recently successfully developing Chinese AI software without chips from the US manufacturer Nvidia.
What could a smart economic policy look into that takes into account these complexities?
Smart economic policy takes into account the complex interactions in the global economy. How does that work? Thanks to digitization, it uses the enormous amount of data available, which allow the supply chains of individual companies, industries or entire nations to be shown in the highest resolution.
So these data mountains are already searching and gaining a myriad of knowledge about the complex interdependencies in supply chains. For example, they were able to show how the ecological footprint of nations can be significantly reduced if CO2 savings are carried out in critical places in the supply chain. Because of the importance of supply chains to make economics more stable and sustainable, there is even an entire research center in Austria that is devoted to data -based research of supply chains.
So instead of raising blind tariffs on all imports, smart trading policy tries to define rules and limit damage through targeted measures. Even if even a controversial measure, the EU tariffs, for example, take up some of these findings on Chinese electric cars. Colcs were introduced here after thorough analysis and graduated because certain Chinese electric car manufacturers were accused of calling up competitive prices in order to hinder the European electrical car industry to become competitive themselves.
So what could smart economic policy look like in the 21st century that takes into account the complex interactions of the global economy?
First of all, it shouldn't pretend as if tariffs are imposed in vacuum. Customs trigger tariffs and this spiral can develop its own dynamic that evades every control.
Second, trade restrictions should only be used where they help to strengthen their own competitiveness. You must inevitably be temporary and in cooperation with the economy there must be a timetable until when the domestic industry can exist on your own feet and in global competition.
And thirdly, smart trading policy should proceed data -based in order to find critical points in the supply chain, and prevent tariffs from leading unwanted consequences such as migration of production. Smart economic policy uses tweezers and not the chainsaw to achieve economic goals.
