Trumpism and Economic Realities

 

About eight years ago, I wrote that we were nearing the end of globalization’s golden age. The need to outsource capital and production across borders had started to lose its meaning in the face of technological transformation. Today, the United States’ new tariff measures and rising protectionist policies clearly confirm that forecast. Yet this shift not only disrupts global cooperation—it also poses a serious threat to the very economies adopting these policies.

There is no coherent economic theory behind what Trump has been doing. Perhaps the most troubling aspect is that the world doesn’t quite know how to negotiate with him. Because we are not dealing with a rational negotiator who understands how trade works or values consistent economic principles.

Trump sees the U.S. trade deficit—especially in goods—as an injustice. This perception is rooted in an assumption that the United States is superior to other countries, and therefore, those countries should purchase more American products than the U.S. buys from them.

But the world of the 21st century is not the same as that of the 1950s. Today, the service sector constitutes the largest part of the U.S. economy. Manufacturing accounts for just about 9 to 10 percent, whereas the United States runs a trade surplus in services like tourism, education, healthcare, and intellectual property. So what does Trump do with these sectors? Visa policies are being implemented in ways that restrict, rather than encourage, the inflow of talent. Tourism is being hindered rather than promoted.

Trump seems unaware that these restrictive measures are damaging America’s most competitive export industries—software, tourism, and education. Even if he somehow succeeds in bringing manufacturing back to the U.S., production today happens in smart factories, meaning it won’t create the kind of blue-collar jobs his base is hoping for. Moreover, reconstructing the supply chains and logistics networks necessary to support such a shift is far more complicated than it may appear. The idea of restoring the American economy to its 1950s state is not only unrealistic—it’s impossible. In the meantime, however, the global economic system risks suffering irreversible damage.

Ironically, Trump’s tariffs are more likely to hurt the U.S. economy than help it. By increasing the cost of imported goods, they drive inflation upward. Meanwhile, retaliatory actions from China and the EU make it harder for American exporters to compete abroad. For instance, soybean producers lost significant markets during the 2018 trade wars—today, that risk has expanded to multiple sectors.

In a world defined by interconnected innovation, full economic independence is nothing more than a fantasy. From semiconductors to batteries, the U.S. innovation engine is deeply reliant on global supply chains. Protectionism may seem like a patriotic win in the short term, but if these policies persist, the United States will end up scoring an own goal.