Historical Conclusion Affirms That Economic Bullying Benefits No One

On April 2, the United States announced its long-awaited global plan for reciprocal tariffs. The U.S. clarified that these tariffs would be implemented in two phases: a “base” tariff of 10% on all imports, and much higher rates ranging from 10% to 50% on most countries. China would face a tariff of 34%, while the European Union would see a tariff of 20%. Japan will be subjected to a 24% tariff, and India will face a 26% tariff.

Following the announcement of the tariff plan, stock markets plunged, and global pessimism intensified. The chief economist at Japan’s Nomura Research Institute stated that these tariffs “risk destroying the global free trade system that the U.S. itself has led since World War II.” The U.S. “reciprocal tariffs” directly violate the World Trade Organization’s Most-Favored-Nation principle, which maintains that countries cannot discriminate between their trading partners. This action contravenes the spirit of contracts and undermines the fair competition environment established under the WTO. The time from the initial announcement of the “reciprocal tariff” concept to the release of the corresponding tax rates for various countries on April 2 was less than two months, raising concerns about the quality of the so-called data used for tariff reviews.

Some have claimed that the final data resembles calculations based on trade balance deficits rather than actual tariff structures. In other words, under the guise of so-called fairness and reciprocity, it is merely another form of economic bullying reflected in the “America First” policy. Consequently, the international community responded strongly, with many trading partners expressing deep discontent and clear opposition. As a result, the effects of supply chain disruptions, trade shrinkage, and rising production costs will further impact businesses and individuals across various countries. Lianhe Zaobao reported that “the tax rates and their scope have exceeded expectations,” citing expert analysis that suggests if a global trade war were to erupt, the consequences could be more severe than those of the Great Depression of the 1930s. Bloomberg Economics statistics indicate that emerging markets will be the most affected, including India, Argentina, and most countries in Africa and Southeast Asia.

In light of U.S. trade policy, JP Morgan Research raised the likelihood of a global recession in 2025 to 40%. Different sectors have adopted a pessimistic outlook on the U.S. tariff plan, believing it will cause the already inflation-stricken global economy to lose its recovery momentum, as many countries face the risk of economic recession, while geopolitical tensions are also expected to escalate.

Economic bullying benefits no one; this is a historical conclusion. Even if we only look at the history of tariffs in the United States, it is not hard to see that the current approach of reciprocal tariffs by the U.S. government is akin to stepping on one’s own toes while ignoring historical lessons. The chaos of high tariffs following the Smoot-Hawley Tariff Act of 1930 is not too far in the past, and the one-sided tariff war initiated by the U.S. government against China in 2018 did not achieve the unilateral victory Washington had hoped for. According to data from the U.S. Department of Commerce, U.S. exports to China fell by 11% in 2019, while imports dropped by 16%, directly affecting the agriculture, manufacturing, and technology sectors in the U.S. The Peterson Institute for International Economics estimates that American consumers pay about $57 billion more each year due to tariffs, resulting in a significant increase in the cost of living. Previous unilateral tariff policies did not crush China; today, in the face of renewed tariff pressures from the U.S., China has become more confident in both its economic structure and international standing.

In fact, American consumers are beginning to recognize the situation they will face. The latest forecasts from the Yale University Budget Lab indicate that imposing broad tariffs of 20% in the U.S. could cost the average American household up to $4,200 annually, raising consumer prices by between 2.1% and 2.6%. Another study shows that in the event of retaliatory tariffs, the decline in U.S. GDP would be greater than the corresponding decline in any other country. Recent polls indicate that American consumers are concerned about the impact of tariffs and believe that the U.S. government is overemphasizing them while downplaying rising prices. A survey conducted by The Economist in collaboration with YouGov found that only 24% believe that foreign countries and companies bear the cost of tariffs, while 54% think that American companies and consumers bear the brunt.

History will once again demonstrate that economic bullying, which seeks to shift burdens onto neighbors, will ultimately lead to adverse outcomes and undermine the free trade system led by the United States. There is no way to achieve win-win outcomes for all except by adhering to multilateral rules. The idea of “you are in me, and I am in you” is a prominent feature of globalization, and the U.S.’s heavy reliance on global supply chains underscores this. By imposing tariffs as a sword hanging over its own head, American companies will suffer the brunt of supply chain disruptions. Economic bullying and coercion will not solve America’s problems; instead, they will exacerbate global risks. There will be no winners in a trade war or tariff war, and protectionism will lead to no positive outcomes. If the U.S. government recklessly resorts to economic bullying that harms the legitimate interests of other countries, it will ultimately find itself increasingly distant from the prevailing global current.

Source: Editorial from the Chinese newspaper Global Times