TRUMP'S TARIFF FALLOUT

If Trump continues for the next three and a half years as he has during his first six months, the US could find itself facing the kind of conditions that Roosevelt had to address, only this time the economic decline could be irreversible

- Kaushik Basu

The first six months of Donald Trump’s second presidency have been marked by a flurry of executive orders and legislative activity unparalleled in US history, with the possible exception of Franklin D, Roosevelt’s first 100 days in office.

The key difference is that Roosevelt's New Deal was a radicaland ultimately successful - effort to pull the United States out of the Great Depression. By contrast, Trump's policy drive lacks such a clear, immediate catalyst, as the US economy was performing well before he came to office.

Rather than responding to a crisis, Trump’s policies seek to reorient the American economy by revitalizing its once-dominant manufacturing sector. Whether they will succeed is far from certain.

Weaponization of international trade is at the top of Trump’s economic agenda. Since April, he has imposed sweeping “reciprocal” tariffs on almost every country in the world, then adjusted them repeatedlylifting some, lowering others, and reinstating or increasing many. As a result, the average effective US tariffrate has surged from 2% in 2024 to more than 16%, its highest level since the 1930s.

While many commentators have warned that sharply higher tariffs could fuel domestic inflation, the real risk lies elsewhere. By increasing the cost of imported inputs from countries like Mexico, Canada, and India, Trump’s tariffs raise US production costs and undermine America’s ability to compete globally.