Nowhere in official statements is the obvious mentioned: that the U.S. over the years has lost its absolute competitive advantage in goods production
Lefteris Tsoulfidis is Professor of Economics at the University of Macedonia
On April 2, 2025, the Trump administration announced long-debated “reciprocal” tariffs on the U.S.’s largest trading partners, aiming to usher America into a new “golden age” of prosperity. However, this decision appears to completely ignore the repercussions for the rest of the world, as if they are to blame exclusively for America’s own domestic problems.
Regarding European tariffs, the administration estimated that the U.S. trade deficit with the EU amounts to 43% of the EU’s exports to the U.S. Based on this, Trump argued that a 20% tariff on European imports would be more than fair. In the case of China, it similarly estimated that China’s tariffs on American imports roughly amount to 68%. Therefore, the U.S. claims the right to impose an additional 34% tariff on Chinese goods, on top of existing ones, bringing the total to 54%.
As for South Korea, the Trump administration asserted that the country imposes a 50% tariff on American imports. This estimate included not only official tariffs but also alleged Korean government intervention in the won-dollar exchange rate and other barriers to U.S. imports. The conclusion? A 25% tariff on South Korea—though no evidence was provided for these claims.
The UK presents a distinct case, with tariffs set at 10%, based on an assessment of British taxes on U.S. imports. It is important to note that no explanation was given for the 10% tariff imposed on countries with which the U.S. has a trade surplus. Canada and Mexico will be examined soon, and of course, other considerations will be applied.
Nowhere in official statements is the obvious mentioned: that the U.S. over the years has lost its absolute competitive advantage in goods production. Tariffs, if maintained, do not solve the deeper problem—instead, they protect so-called “zombie” businesses that survive artificially, undermining long-term economic competitiveness. The current leadership aims for a revival of U.S. manufacturing, yet this seems unrealistic given current technology and wage levels. Tariffs cannot change this harsh reality.
Moreover, the U.S. administration insists that the expected tariff revenues will address the mounting public debt or provide tax relief. In reality, these tariffs will ultimately be paid indirectly by taxpayers, as they will be passed on through higher prices. Ironically, the government itself admits this when advocating for replacing direct taxes with indirect ones.
Trump’s official rhetoric—that he has exposed an “international trade scam” harming the average American taxpayer—does not hold up. Lower absolute costs and historically competitive prices are the main advantages of countries with trade surpluses against the U.S. In fact, international trade textbooks should be rewritten, as they wrongly praise comparative advantage over absolute advantage, among other myths that unfortunately gain credibility among policymakers. As for economic consequences, I have previously analyzed them in an earlier article in a Greek newspaper that their effect will appear in the stock market.
Trump’s achieves one fundamental “attainment”: it further distances the U.S. from its former allies—countries with which it has signed international agreements, such as the GATT and the World Trade Organization (whose rules are probably being violated). Instead, he unites the rest of the world against America and disrupts the international order. He considers these effects temporary, but the worst for Trump’s policies may yet come from within the U.S.
The EU is preparing countermeasures, while China, Japan, and South Korea are exploring more aggressive strategies. The U.S. has warned that retaliatory tariffs will be met with harsh countermeasures—in other words, a “trade war”. Thus, we are entering a period of escalating and fierce competition, with unpredictable economic and geopolitical consequences.
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