US President Donald Trump recently announced a sharp increase in tariffs across the board with all the USA’s trading partners, apparently in an effort to bring better balance in the countries’ trading relations in terms of exports, and imports, and for also increasing both domestic industrial production, and employment levels. Having said that, apparently at the back of the conciliatory attitude of as many as reportedly 75 trading partners, who wished to renegotiate trading terms with the USA, he paused the application of recently announced increase in tariffs for 90 days on all trading partners– except China, which continues to carry a significant retaliatory stance with the USA– while the uniform 10 percent tariff rate on all trading partners will continue to be applied.
The increase in tariffs, while it jolted the markets worldwide, the decision to pause application of tariffs, however, brought back some gains. An April 8, Guardian published article ‘How “liberation day” rout compares with other notorious stock market crises’ pointed out market losses as ‘Donald Trump’s escalating trade war has plunged global financial markets into the steepest rout since the spread of the Covid pandemic five years ago. Drawing parallels with the 1929 Wall Street crash and the ensuing 1930s Great Depression, the US president’s “liberation day” tariff plan has led to warnings of a global recession from leading economists. More than $5tn (£4tn) has been wiped off the value of global stock markets since Trump’s Rose Garden address on Wednesday evening last week…’
In terms of gains by market after the announcement of pause in application of tariffs, an April 9, Financial Times (FT) article ‘Global stocks soar as Donald Trump backs down from trade war’ indicated ‘Donald Trump stunned global investors on Wednesday when he announced a 90-day pause in additional tariffs on countries that were willing to negotiate with the US… US equities jumped immediately after Trump’s announcement, with the blue-chip S&P 500 index closing up 9.5 per cent. The rally spread to Asia on Thursday, with Japan’s Topix rising 8 per cent and Taiwan’s Taiex advancing 9.3 per cent. …The stunning climbdown from the US leader came after a week of turmoil in global markets, with trillions of dollars shed in equities around the world, US bonds sharply selling off and oil prices plunging to levels last seen during the Covid-19 pandemic. …A heavy sell-off in US government debt, a bedrock of the global financial system, eased following Trump’s U-turn and a Treasury auction that signalled robust international demand.’
The World Trade Organization (WTO), in its April 2025 report ‘Global trade outlook and statistics’, showed concern over the impact of tariffs on trade as follows: ‘The outlook for global trade has deteriorated sharply due to a surge in tariffs and trade policy uncertainty (TPU). Based on measures in place as of 14 April, including the suspension of “reciprocal tariffs” by the United States, the volume of world merchandise trade is now expected to decline by 0.2% in 2025 before posting a modest recovery of 2.5% in 2026. The new estimate for 2025 is nearly three percentage points lower than it would have been without recent policy shifts, and marks a significant reversal from the start of the year, when WTO economists expected to see continued trade expansion supported by improving macroeconomic conditions.’
Also, it is hoped through trading negotiations between the USA and its trading partners in the wake of tariffs policy, there will be an overall move towards much-needed decrease in tariffs’ level, and non-tariff barriers, globally, including diminishing walls of patents/intellectual property rights (IPRs) for commodities that are of essential nature, like vaccines, and which otherwise should better reflect investment of taxpayers’ money in the shape of reduced prices.
The same report with regard to impact of trade policy related uncertainty – in this case possible uncertainty likely due to the recent changes in tariff by US President – pointed out ‘Trade policy uncertainty (TPU) has become a key factor influencing global trade and investment decisions. Firms making long-term commitments – whether investing in export capacity, entering foreign markets, or building international supply chains – depend on stable and predictable trade policies. When uncertainty around future tariffs or trade relations increases, firms may delay or scale back investments. This, in turn, reduces trade flows, limits productivity gains from international competition, and ultimately lowers economic growth.’
That being said, while the loss in market, fall in trading output, and global economic outlook affected as a result of tariff decision by US President are indeed causes of concern, yet virtually unhindered capital movement, or ‘hot money’ should not be allowed to act as ‘virtual parliament’ passing decisions on public policy, which should otherwise be led primarily by public opinion. Moreover, trading volumes, or economic growth, should not be the primary concern, but the extent of trade being fair, especially for developing countries, and the quality of growth in terms of how much it addresses equity concerns, along with the extent of economic resilience being reached given the fast-unfolding climate change crisis, should be first order of preference.
There is indeed a case for protectionism, although the way it is being carried out by US President needs a more nuanced approach. Hence, using protectionism to build industrial base for essential commodities is indeed needed for both improving the outlook and orientation of trade, which should not just get reduced to cross-border interactions having otherwise undesirably minimal impact in improving a country’s capacity in terms of scaling the levels of value chain; not to mention trade operating in an environment where labour is not just seen in terms of how much efficiency gains it can bring, but also the labour working conditions, their income levels, and domestic employment situation, instead should be the main focus.
Also, it is hoped through trading negotiations between the USA and its trading partners in the wake of tariffs policy, there will be an overall move towards much-needed decrease in tariffs’ level, and non-tariff barriers, globally, including diminishing walls of patents/intellectual property rights (IPRs) for commodities that are of essential nature, like vaccines, and which otherwise should better reflect investment of taxpayers’ money in the shape of reduced prices.
