Controversies and Impacts of U.S. Trade Policy

Recently, the U.S. government has introduced a series of radical tariff policies, sparking widespread discussion and controversy globally. These policies may have far-reaching effects on international geopolitical and economic landscapes, but there are still many uncertainties.

As supporters of free markets and global trade, we believe that trade is essentially a mutually voluntary act that only occurs when both parties can benefit from it. Therefore, trade is not a zero-sum game, and the long-term existence of trade imbalances between countries has its rationality. We believe that all forms of tariffs have a negative impact on global economic growth and productivity. However, there are still significant differences in academia and politics regarding the causes of international trade imbalances, their operational mechanisms, and the impact of tariff policies on capital flows. This article will focus on exploring these issues.

The President of the United States believes that the U.S. has been at a disadvantage in trade for a long time, and the huge trade deficit is clear evidence of this. He blames the trade deficit on the protectionist policies of major trading partners (such as China, the EU, and Japan), including high tariffs, regulatory measures that favor domestic producers, and currency manipulation. He believes these practices have led to the decline of American manufacturing and harmed the interests of American workers. By implementing "reciprocal tariffs," he hopes to restore a fair competitive environment, revitalize American manufacturing, and fulfill his campaign promises.

However, some economists hold a different view. They argue that the United States actually benefits from the trade deficit because American consumers are able to enjoy cheap goods and services produced by other countries. This situation can persist mainly due to the dollar's status as a global reserve currency. However, a long-term accumulation of trade deficits may eventually lead to a collapse of the dollar, and the real income of Americans could decline significantly.

Another perspective holds that the United States' trade deficit actually reflects its economic strength. The U.S. is home to some of the world's best companies and most innovative enterprises, attracting the favor of global investors. At the same time, many overseas investors, for the sake of asset protection, also tend to move their funds to the U.S., where the rule of law is more robust. These factors lead to a surplus in the U.S. capital account, which in turn causes the trade deficit. From this perspective, a sustained trade deficit may be a sign of the success of the U.S. economy rather than a problem.

The global economic system is intricate and complex, making it difficult to grasp the truth from a single perspective. There is a bidirectional interaction between trade deficits and capital account surpluses, both of which are important factors in understanding the global trade pattern. While the U.S. president's views on trade have some merit in certain aspects, they may overall be biased. Tariffs are essentially a tax on American consumers, which could weaken the U.S. economic power. Although the American middle class may have been relatively harmed during the process of globalization, reversing globalization does not necessarily improve their situation.

Overall, the new tariff policy may have a negative impact on the US economy, but it is unlikely to immediately destroy the dollar's status as a reserve currency. The evolution of the global economic landscape remains to be observed, and we need to maintain an open and rational attitude, taking into account multiple factors to better understand the complexities of international trade.