Just over half a year into Donald J Trump’s second term, one can see how the Trump administration is moving to fulfill some of the promises made to the American public on the campaign trail. Elaborating on my previous publication (Jones, 2025), Trump has all but given up on further pursuing peace in Ukraine, claiming that he is unsure of whether this conflict can be resolved in the near future (Johansen, 2025). Yet there are more pertinent matters to cover, including Trump’s tariff plans following his rejection of the USA’s considerable trade deficit. The following seeks to explain the Trump tariffs, the reason behind them, and the potential outcomes of their establishment.

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“Liberation Day”

On April 2nd, 2025 Trump delivered an hour-long speech in front of the White House where he signed Executive Order 14257, titled Regulating Imports with a Reciprocal Tariff to Rectif Trade Practices that Contribute to a Large and Persistent Annual United States Goods Trade Deficit (The White House, 2025). The title itself reveals the raison d'être for the imposition of tariffs, which aims to tackle the large trade deficit that the US has with the majority of its trading partners. One must posit the following question: how does a trade deficit impact the US?

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Economists across the aisle have criticised the notion that a significant trade deficit i a dangerous thing for the USA. This question requires great amounts of context, without which one cannot provide a satisfactory answer. Whereas Trump speaks of the trade deficit in explicitly negative terms, claiming that the world is taking advantage of the US, this is not necessarily the case at all. Trade deficits can be unfavourable for developing economies for numerous reasons (Rehman et al., 2021). Firstly, nascent/developing economies may struggle to grow when growth itself is reliant upon borrowing increasing amounts of money. Secondly it can lead to displacing and undercutting domestic industries due to their competition with foreign multinationals which produce for much cheaper than they can at home. Lastly, it is more likely to default on its debts if the deficit has spiralled out of control.

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Now one must ask how these considerations relate to the USA. The US possesses the strongest economy and military in the world (Yared, 2024). They maintain their status as a world hegemon (whether they are the sole hegemon or one of a few is not pertinent to this article). The US Dollar is one of the strongest currencies in the world, and possesses a global dimension with most countries seeking to keep a decent reserve of the currency in their treasuries. As such, the US is in a condition that is polar opposite the one discussed briefly above. In the case of the US the deficit can be viewed as a strength, and a significant one at that. How so? The trade deficit means that other countries are sending more goods/investments into your country than you are sending out. This speaks volumes about the soft power the US has enjoyed, and appears to keep enjoying (The Conversation, 2025). The reason that the US is able to sustain the deficit is precisely due to the nature of its hegemon status, economic strength, and technological prowess. Instead of fearmongering about the deficit, it is crucial to understand that there are no downsides to it for a country in the position of the US, as it can never really default on its debts (this would be catastrophic for the world economy, and something that no country would like to see happen) (Choi et al, 2024). In fact, on the contrary, as Economist Hassan claims it to be “a sign of American economic strength” (The Conversation, 2025).

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“Reciprocal” Tariffs

The other aspect evident from the title of the Executive Order is that these newly imposed tariffs are reciprocal in nature due to the mistreatment of the US by most, if not every country. Trump displayed a poster which presented a table of countries, the “Tariffs Charged to the USA (including currency manipulation and trade barriers)”, and the “USA Discounted Reciprocal Tariffs” (Cole, 2025). The formula used to calculate the tariffs charged to the USA were slammed almost universally by expert economists, who rightfully claim that this number is “fake” (Dorn, 2025). The typology and calculations provided on the tariff poster deliberately serve to be misleading and to confuse the average voter who may not be fully aware of what tariffs and trade deficits are. Additionally, framing these as reciprocal and discounted provides the ability to place blame on other countries for imposing said tariffs first. In turn, the response from the US is claimed to be “discounted”. This signifies the effort to portray the US as benevolent.

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Tariffs, No Tariffs, Tariffs, No Tariffs…

From the beginning of the Trump Presidency, fearmongering and threatening the imposition of high tariffs were often used rhetorically, even setting dates for when these were to take effect. In reality, these were either postponed, delayed or cancelled. The reciprocal tariffs ended up being put on pause, yet threats of imposition maintain an insecure environment for the cultivation of business, finance, and stock portfolios (Reuters, 2025).

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The announcement of tariffs and their subsequent moratorium on numerous occasions, has sent the stock market into free fall, with many losing savings and stock portfolios that were more or less stable before that (Evans, Melloy, Singh, 2025). This keeps the market in a perpetual flux, whereby the lack of certainty has produced an environment entirely hostile to conducting business and trading in stocks. Despite the market somewhat rebounding, it has not yet recovered back to its initial value before the tariff scare.

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The actions of the Trump Administration have for the most part been unpredictable as it appears that policies are being chosen on the day based on the mood of the President at the time. It is becoming increasingly difficult to forecast decisions that will be taken. One thing is certain though, the reinvention of economics by the Trump Administration may still wreak havoc on economic prosperity inside the US and far beyond.

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References

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Choi, J., Dang, D., Kirpalani, R., Perez, D. (2024). Exorbitant privilege and the sustainability of US public debt. CEPR. Available at: https://cepr.org/voxeu/columns/exorbitant-privilege-and-sustainability-us-public-debt.

Cole, A. (2025). Trump’s reciprocal tariff calculations are nonsense, will punish mutually beneficial trade. Tax Foundation. Available at: https://taxfoundation.org/blog/trump-reciprocal-tariffs-calculations/.

Dorn, S. (2025). Trump’s tariff formula slammed as ‘fake’ and ‘incredibly stupid’ by experts. Forbes. Available at:
https://www.forbes.com/sites/saradorn/2025/04/03/trumps-tariff-formula-slammed-as-fake-and-incredibly-stupid-by-experts/.

Evans, B., Melloy, J., Singh, P. (2025). Dow nosedives 1,600 points, S&P 500 and Nasdaq drop the most since 2020 after Trump’s tariff onslaught. CNBC. Available at: https://www.cnbc.com/2025/04/02/stock-market-today-live-updates-trump-tariffs.html.

Hassan, T. A. (2025). The trade deficit isn’t an emergency - it’s a sign of America’s strength. The Conversation. Available at: https://theconversation.com/the-trade-deficit-isnt-an-emergency-its-a-sign-of-americas-streng
th-252466.

Johansen, B. (2025). Trump on if he can end fighting in Ukraine: ‘I don't know’. Politico. Available at:
https://www.politico.com/news/2025/07/05/trump-russia-ukraine-war-00440027.

Jones, U. (2025). Staring down the barrel: Perspectives for a lasting Ukrainian peace. International Platform for Crime, Law, and AI. Available at: https://www.intjournalcrimelawai.com/staring-down-the-barrel-threats-to-a-lasting-ukrainian-peace-deal.

Rehman, S., Taqi, M., Ahmad, W., Rehman, S. (2021). Impact of trade deficit on economic growth: A case of some selected countries. International Research Journal of Management and Social Sciences, 2(2). 27-39.

Reuters. (2025). Markets' 90-day tariff pause rollercoaster nears an uncertain end. Available at: https://www.reuters.com/world/china/global-markets-tariffs-deadline-graphic-pix-2025-07-04

The White House. (2025). Regulating imports with a reciprocal tariff to rectify trade practices that contribute to large and persistent annual United States goods trade deficits. Executive Orders. Available at: https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits/.

Yared, P. (2024). US military strength secures financial dominance. CEPR. Available at: https://cepr.org/voxeu/columns/us-military-strength-secures-financial-dominance.

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