Trump’s tariff war has failed on every front

IT IS hard to overstate how profoundly US President Donald Trump has reshaped the international landscape over the past 14 months.

Since World War II, American foreign policy has largely followed an internationalist approach.

Institutions such as the International Monetary Fund, World Bank and the World Trade Organization (WTO) – all founded and led by the US – helped maintain the multilateral order, while economic relations among most countries operated under the principle of non-discrimination.

Trump has upended that order, replacing it with a nationalist and openly imperialist “America First” agenda, vividly illustrated by his open-ended, reckless war against Iran.

His withdrawal from international institutions such as the World Health Organization has weakened communication channels essential for monitoring communicable diseases, coordinating flight paths, tracking weather events and fostering global cooperation.

At home, he has pursued an equally destructive course, targeting key US institutions, including emergency relief systems, environmental protections and – above all – the rule of law.

Moving the goalposts

Many of these moves have been taken with little to no planning or strategic forethought. Trump’s tariffs, many of which were based on dubious calculations and subsequently lowered or reversed, are a case in point.

Even the remote Heard Island and McDonald Islands, whose only known inhabitants are penguins and seals, were not spared.

The rationale for Trump’s tariffs has also shifted repeatedly. At different times, they have been justified as a way to eliminate bilateral trade deficits, punish countries said to treat the US unfairly, reduce inflation, enhance national security and boost manufacturing employment.

Yet, his decisions often contradict those stated objectives.

For example, the US trade surplus with Brazil did not stop him from imposing sweeping tariffs on Brazilian goods, in retaliation for the imprisonment of former president Jair Bolsonaro, his close political ally.

Vietnam offers another striking example of erratic US policymaking.

In July, the Trump administration announced a 20 per cent tariff on Vietnamese imports, even though Vietnam had agreed to eliminate its own tariffs on US goods.

The decision reportedly caught Vietnamese policymakers by surprise, as they believed they had secured a much lower 11 per cent rate.

The list of inconsistencies and abrupt reversals goes on.

Most notably, Trump has repeatedly targeted Canadian imports, raising and lowering tariffs on goods such as cars and aluminium, despite having negotiated and signed the US-Mexico-Canada Agreement during his first presidency.

Given its chaotic roll-out, it should come as no surprise that his tariff agenda has failed to achieve any of its stated objectives.

The US trade deficit reached a record high in 2025, manufacturing employment declined, and inflation remains above the US Federal Reserve’s 2 per cent target.

When it comes to national security, few could argue that Trump’s policies have made the US safer.

At the same time, his tariffs and the uncertainty surrounding them have sent shock waves through the global economy.

Instability for US producers

The US Supreme Court recently rejected Trump’s use of the International Emergency Economic Powers Act to pursue his tariff agenda. His subsequent announcement that he would re-impose a universal 10 per cent tariff under a different statute has only deepened that uncertainty.

As a result, US producers cannot predict how much import competition they will face or at what price, and firms that rely on imported inputs do not know how much they will ultimately pay for them.

Meanwhile, export-oriented US companies cannot gauge the extent to which higher input costs will place them at a disadvantage, relative to foreign competitors.

Such conditions impede investment. Producers that might otherwise expand capacity may be reluctant to do so, because the tariffs protecting them today may no longer be in place tomorrow.

Exporters, facing higher costs and retaliatory tariffs from other countries, may scale back their global operations. Many businesses cannot even determine what tariff rates actually apply to them.

Fortunately, the Supreme Court’s ruling is likely to limit Trump’s ability to use discriminatory tariffs as a bargaining tool.

In practical terms, exporters to the US would no longer face the risk that a competing producer might suddenly receive a lower tariff on identical goods.

The president previously relied on this tactic when threatening major car exporters such as South Korea and Japan, as even small differences in tariff rates can shift competitive advantage from one producer to another.

In response to the ruling, he has threatened to use other measures, such as anti-dumping duties, to offset the loss of his discriminatory tariffs.

Trump has also invoked a statute that allows him to impose across-the-board tariffs for up to 150 days. These steps, while damaging, would at least apply equally across countries, rather than favouring one producer over another.

Other provisions of US trade law could also be used, including Section 301 of the Trade Act of 1974, which targets unfair trade practices, and Section 232 of the Trade Expansion Act of 1962, which allows tariffs on national-security grounds.

But these tools typically require lengthy investigations and involve procedural delays. And even if Trump were to prevail, the Supreme Court’s ruling has already curtailed his ability to use tariffs as a policy lever.

All of this underscores the importance of the WTO’s most-favoured-nation principle, which was designed to prevent precisely such discrimination.

Trump will not be president forever, but the damage his administration has done to the global trading system will be hard to undo.

However, when an open, multilateral trading system is restored, rolling back his arbitrary and reckless tariffs will be a necessary first step. PROJECT SYNDICATE

The writer, a former World Bank chief economist and former first deputy managing director of the International Monetary Fund, is senior research professor of international economics at the Johns Hopkins University School of Advanced International Studies and senior fellow at the Center for International Development at Stanford University