The international financial markets have already reacted: stock prices plunged worldwide, as did gas and oil prices – the latter despite an unchanged supply situation. The 15% decline within a few days indicates that the markets are expecting a decline in demand – in other words, a global recession. All the tariffs were reduced to a maximum 10%.
Trump’s tariff spasm: a serious misunderstanding of capital interests
By Franz Garnreiter
[This article posted on April 11, 2025 is translated from the German on the Internet, https://www.isw-muenchen.de/online-publikationen/texte-artikel/5358-trumps-zollkrampf-schwere-verkennung-der-kapitalinteressen.]
Donald Trump, endowed with limited economic insight and largely resistant to competent advice, has once again raised tariffs – on almost all countries. According to press reports, even imports from a small island in the Indian Ocean, inhabited only by penguins, are said to be affected. Trump’s reasoning: “For decades our country was pillaged, plundered, raped and plundered – by nations near and far, by friends and enemies alike.” (1) In particular, Vietnam was targeted, with one of the highest tariff increases of 46%.
Such statements are disturbing, especially when uttered by the president of a country that has waged wars of aggression in almost every decade of the last 100 years, that is responsible for millions, perhaps tens of millions, of war dead, and that waged one of the cruellest wars since the Nazi terror in Eastern Europe in Vietnam. The USA maintained torture schools such as the “Escuela de las Americas” in Panama to train repression in dependent countries, and its corporations plunder raw materials worldwide and accumulate immense riches. When a representative of this system stylizes itself as a victim, it almost takes your breath away.
Some examples (2)
Vietnam: 46 %
Bangladesh: 37 %
Thailand: 36%
China: 34%
Indonesia / Taiwan: 32%
Switzerland: 31%
South Africa: 30%
Pakistan: 29%
India: 26%
South Korea / Japan: 25–24%
EU: 20%
Argentina / Australia / Brazil / Saudi Arabia / United Kingdom: 10%
Trump’s vision: dismantling the world economy
Trump sees the US’s large trade deficit as the central problem – in 2023 it was $800 billion, ten times as high as the second-largest deficit. In the 1990s, it was still below $100 billion. Over the same period, manufacturing’s share of US GDP fell from 23% to 17%. (3) A chart on this shows that it takes roughly the three largest trade surpluses to balance the US deficit.
What Trump seems to be aiming for is a renaissance of domestic industrial production – more “Made in the USA”, less reliance on imports. He wants to go back to a time before globalization, when production was still organized primarily on a national basis. In those days, domestic industrial value creation was associated with an export orientation, not with today’s practice of globally distributed production chains.
But that world no longer exists. Instead of production for export, today a worldwide division of labor dominates, in which corporations relocate their production to where maximum profits can be achieved through wage costs, tax advantages, infrastructure or know-how. Production chains are globally fragmented, resulting in an opaque network of locations, intermediate products and suppliers.
Reversing these structures is no trivial matter: it is complex, detailed, expensive – and politically risky. Trump’s sudden tariff increases will not bring about a structural turnaround, but above all chaos. Anyone who believes that the industrial base can be brought back by unilateral punitive tariffs misunderstands economic realities. Historical examples of protective tariff policies were aimed at long-term industrial development – Trump, on the other hand, is acting without a concept or context.
Conflict with capital interests: corporations think globally
Trump’s measures are in open contradiction to the interests of many US corporations. The major capital interests are likely to be significantly different from how Trump perceives them. Example Nike: According to the Süddeutsche Zeitung (April 5, 2025), the US sportswear company has half of its shoes and a quarter of its textiles manufactured in Vietnam. If you add Indonesia (32% tariff) and China (34%), 95% of Nike products are affected by the tariffs. These products are destined for the US market. Nike has no interest in a tariff policy that massively increases its production costs – and is thus exemplary for many companies with global production.
Trump apparently ignores the reality of global supply chains. Modern corporations organize their production in many stations, spread across different countries. Criteria include favorable wages, government support, good logistics, proximity to suppliers, research institutions or sales markets. The result is a finely tuned system – and a global production network held together by transport chains. 110,000 cargo ships alone transport semi-finished and preliminary products around the world every day (4). The fuel used – heavy oil – is inexpensive, albeit extremely harmful to the environment.
Trump is disrupting this system with his tariffs. Surcharges of between 20% and 50% on imported products inevitably lead to massive cost increases – and thus to economic upheaval.
Inflation and additional costs: chaos is on the rise
Let’s take Nike again: products from Vietnam are becoming significantly more expensive in the USA. This is inflation in the classic sense – rising procurement costs due to higher import prices. The situation is reminiscent of the price surge caused by the sanctions against Russian energy in 2022. If sales in the US fall, Nike may try to divert its goods to Europe, where there is no customs surcharge on Vietnamese products. The result: oversupply, price pressure, possibly falling prices in the EU.
A similar scenario could play out for cars: German manufacturers could shift vehicles they can no longer sell in the US to Europe or Japan. At the same time, Toyota and Hyundai, which are also affected, are increasing their presence in the EU market. The result: higher car prices in the US, lower prices in Europe, combined with shifts in sales, pressure on domestic manufacturers and potentially rising unemployment.
In turn, consumer prices in the US will rise – not only for imported products but also for domestically produced goods. This is because US companies can easily raise their prices in this situation, as consumers expect higher prices anyway. We saw this pattern back in 2022: the oil price shock enabled many companies to increase their profit margins. Consumers bear the brunt – in the form of losses in real wages and declining demand. A recession is almost unavoidable.
The resulting economic consequences depend on many factors: the structure of supply chains, the reaction of the affected countries, possible counter-tariffs, exchange rate developments – but one thing is certain: the global economy is sliding into a phase of considerable uncertainty.
Markets hate uncertainty – and react promptly
The international financial markets have already reacted: stock prices plunged worldwide, as did gas and oil prices – the latter despite an unchanged supply situation. The 15% decline within a few days indicates that the markets are expecting a decline in demand – in other words, a global recession.
Some US companies may benefit in the short term – higher import prices improve their competitive position. But these advantages are canceled out by inflation and falling purchasing power. Tariffs have the same effect as consumption taxes: they increase government revenue but hit consumers. Trump is likely to use the revenue to finance tax breaks for his wealthy clientele. The rest of the population is left to pick up the tab.
Conclusion: an economic own goal – global regression through tariffs
If the tariffs remain in place – which is questionable, since they go against the interests of many large corporations – the global economy will be burdened with significant additional costs due to the necessary restructuring of supply chains, higher production costs and lower efficiency. Trump’s tariffs will lead to a massive increase in the price of products and a decline in global competitiveness. A step backwards that is likely to affect not only the US, but also Europe, Asia and Latin America.
Against this backdrop, the global slump in stock market prices is all too understandable: the markets are anticipating not just a temporary imbalance, but the beginning of a profound crisis.
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Sources
(1) Wirtschaftswoche 2.4.2025: USA introduce complex customs system – 20 percent on imports from the EU, https://www.wiwo.de/politik/ausland/donald-trump-us-praesident-verhaengt-zoelle-20-prozent-auf-einfuhren-aus-der-eu/100118574.html
(2) Wirtschaftswoche: 4.4.2025, https://www.wiwo.de/politik/ausland/zoelle-hoehe-laender-territorien-die-komplette-liste-der-neuen-importabgaben-der-usa/100118701.html (complete list of US tariffs imposed)
(3) World Bank, Data Indicators: https://data.worldbank.org/indicator?tab=all
(4) bpb – Federal Agency for Civic Education: in brief: sea freight, 24.9.2024, https://www.bpb.de/kurz-knapp/zahlen-und-fakten/globalisierung/52531/seefracht/