U.S. President Donald Trump holds up a copy of a 2025 National Trade Estimate Report as he speaks during a “Make America Wealthy Again” trade announcement event in the Rose Garden at the White House on April 2, 2025 in Washington, DC. Touting the event as “Liberation Day”, Trump is expected to announce additional tariffs targeting goods imported to the U.S.
Photo by Chip Somodevilla/Getty Images
As he announced a global minimum tariff of ten per cent on all imports to the US on 2 April, Donald Trump was joined on the podium by an auto manufacturing worker called Brian who had, throughout his career, watched the car factories in the Detroit area close down. Brian was there to confirm that Trump’s tariffs have been imposed to support American businesses and the American working class, to replace cheap Chinese imports with goods made in America. Trump called the trade deficit “a national emergency”.
Trump’s advisors claim the tariffs will create 2.8 million jobs and add $758 billion to US GDP. Some countries face tariffs as high as 50 per cent, while the EU faces 20 per cent and China 34 per cent. The UK is one of several countries limited to the standard ten per cent tariff; this probably has less to do with our government’s attempts at negotiation and more to do with the fact that America owns so much of the British economy that inflicting damage on us would be self-defeating.
But this may not be purely a matter of inward-looking protectionism. The Trump administration is interested in a wider resetting America’s relationships with other countries, not through namby-pamby diplomacy but by forcing other nations to react to an unpredictable aggressor. There are signs that Trump’s tariffs are about further extending and concentrating America’s already outsized power in the global economy, and compelling other countries to accept changes to their laws in order to fit with America’s view of how they should be governed. This is about creating a world in which American political and corporate irresponsibility are accommodated even more generously than they are today.
Trump’s economic advisors see it like this: most other countries hold the dollar as their reserve currency. This means there is a lot of demand for the dollar, which makes the dollar expensive, and this makes American goods expensive to anyone outside America. This has been great for Wall Street, but it has destroyed manufacturing businesses and hollowed out the once-proud industrial cities of the Rust Belt.
Connected to this is the idea that America also spends a lot of money defending Western democracies, which adds to its debt. So the Trump position is that having the reserve currency, and the responsibilities entwined with it, has become too expensive. They want a new settlement. The head of Trump’s council of economic advisors, Stephen Miran, wrote this in November: “President Trump views tariffs as generating negotiating leverage for making deals. It is easier to imagine that after a series of punitive tariffs, trading partners like Europe and China become more receptive to some manner of currency accord in exchange for a reduction of tariffs.”
Miran is not the only economist to suggest that such an agreement – a “Mar-a-Lago Accord”, as a sequel to the 1985 Plaza Accord, in which major economies agreed to devalue the dollar against their own currencies – could help the US maintain its position at a lower economic cost. The economist Zoltan Pozsar has suggested that countries wishing to escape high tariffs might be strongarmed not only into buying more US debt, but buying it at much longer terms (“century bonds”). Other countries would have to choose between helping to fund the US “security zone” or being excluded from it (and funding it anyway, through tariffs).
But the Trump administration seems willing to go further still, by demanding that other countries change their domestic laws to suit the American model. Take VAT, for example: one person with knowledge of the negotiations between the UK and US told me that the UK’s value added tax (VAT) had been a sticking point from the start. It has been widely suggested that Trump doesn’t understand that VAT isn’t a tariff. (To be clear, it isn’t; it is a domestic sales tax, and one which American companies can claim back, through a UK subsidiary.) Most of the world charges it on the sale of goods, but the US doesn’t, and Trump apparently thinks this is unfair. Except that actually the US does charge sales taxes at a state level, so the charge that VAT is a tariff is both wrong and hypocritical. If you’re going to argue that VAT is a tariff then you could also argue that business rates or income tax are tariffs, because they could affect the price of American-made goods sold in British shops.
Does the Trump administration really fail to understand this? Whatever Trump’s capacities are as an individual, he is surrounded by highly intelligent people. It seems most likely that the White House has chosen to misinterpret another country’s domestic taxes as tariffs, in much the same way that an angry drunk might choose to interpret a brief glance as an insult. The motive is the same: to start a fight and assert dominance.
Consider also this line from the White House fact sheet accompanying Trump’s announcement: “Access to the American market is a privilege, not a right.” US officials recently confirmed this when they wrote to European businesses demanding they comply with Trump’s executive order banning diversity programmes if they supply goods or services to the US government. These letters claimed that Trump’s policy “applies to all suppliers and service providers for the US government, regardless of their nationality or the country in which they operate”. It may be that America is following China in using the power of its consumer market to export its politics. If you operate an airline with flights to the US, for example, there might come a time when you have to think about how your company’s maps describe Greenland.
This was the opportunity Mark Zuckerberg sensed before his hasty conversion to Trumpism, a conversion motivated partly by cowardice (Trump once threatened to imprison the Meta CEO) but mostly by expediency: he hopes Trump will “push back against foreign governments going after American companies to censor more”. So, if our government wants to regulate Silicon Valley’s aggressive monetisation of the minds of British children, there might be a price to be paid in market access, tariffs and jobs.
Will it work? Trump will naturally blame the financial market turbulence and inflation that result from his tariffs on others. He may well be able to bully other countries into making concessions. But for Brian the auto worker the future is less certain. In 2011, Steve Jobs and Barack Obama met for a dinner at which they discussed the iPhone, perhaps the most successful American consumer product in history, which has been manufactured in China since its launch. Jobs explained why: because only in China could tens of thousands of workers be literally roused from their beds in the night to work 12-hour shifts for far less than the federal minimum wage. When Obama asked Jobs what it would take to get the iPhone manufactured on American soil, he was told simply: “Those jobs aren’t coming back.”
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Topics in this article : Donald Trump, Tariffs, Trade, United States