Beware the false promise of tariffs

In this era of growing protectionism, defending globalisation can feel like a losing proposition.

- Dambisa Moyo

But rather than retreat from the debate, it is more urgent than ever to spell out the costs of a trade war, which threatens to accelerate the fragmentation of the global economy because it is really a war on trade itself. To challenge the logic behind the US administration's protectionist agenda effectively, we must first understand it in clear and concrete terms.

The Trump administration's tariff regime stands on four arguments. The first is that tariffs are a tool to boost government revenue specifically, to help reduce the United States' budget deficit, which many economists view as unsustainable, currently at 6.4% of GDP notably higher than the 50-year average of 3.8%.

High deficits could limit the US government's ability to sustain key entitlement programs like Social Security, Medicare, and Medicaid. To prevent that outcome, Treasury Secretary Scott Bessent has vowed to reduce the fiscal deficit to 3% of GDP by 2028, using tariff revenues as a primary tool.

By imposing tariffs, the argument goes, the US government would generate revenue from imported goods that are currently exempt from federal taxes. The US government also misses out on income and corporate tax revenue that would have been collected if those same goods and services were produced in the US. In theory, tariffs would offset these losses.