#1

The China tariff gambit

In a move rich with symbolism yet uncertain in effect, President Trump’s decision to double tariffs on Chinese goods — from 10% to 20% — signals a sharp departure from decades of liberal trade orthodoxy. David Goldman, writing in UnHerd, argues that despite Trump’s muscular rhetoric, these measures may barely impact China’s economic strength. Indeed, both Beijing and Washington appear to tacitly accept that their previous trading arrangement — built on American consumption driving China’s manufacturing boom — is unsustainable, prompting a strategic recalibration from both sides.

Goldman contends that the tariffs will create only mild inflationary pressure within the U.S. economy. With imports comprising roughly 40% of U.S. retail sales, and assuming exporters absorb about half of the tariff costs, consumers might face a modest 2% increase in prices, nudging the Consumer Price Index upward by approximately one percent. Trump himself has characterized the tariffs’ potential economic fallout as little more than a minor disruption, instead highlighting the anticipated fiscal benefit: an estimated $300 billion annually in additional federal revenue to alleviate persistent budget shortfalls.

Nevertheless, Goldman warns of less visible risks, notably the chilling effect these tariffs could have on domestic investment. American industries rely heavily on imported machinery and capital goods; thus, escalating tariffs may inadvertently suppress investments essential for economic resilience, ironically deepening reliance on foreign production rather than alleviating it. This contradiction underscores the delicate balance policymakers must maintain between immediate economic health and long-term strategic objectives.

Ultimately, while the tariffs signify the end of an era defined by open trade with China, their practical impact remains uncertain. The U.S. and China find themselves navigating a changed economic landscape, cautiously reshaping their relationship into something less symbiotic, more strategic, and potentially just as complicated.

#2

Now, a look at Europe

President Trump’s decision to levy sweeping 25% tariffs on imports from the European Union has sparked deep anxiety on both sides of the Atlantic, signaling a return to economic brinkmanship reminiscent of earlier trade disputes. Targeting key sectors — particularly Europe’s automotive industry — the move risks igniting a spiraling trade conflict that neither side can comfortably afford. As Ursula von der Leyen, president of the European Commission, swiftly warned, Europe’s response will be firm, proportionate, and likely immediate, setting the stage for a damaging tit-for-tat escalation.

Economists view this new tariff salvo as potentially severe, forecasting disruptions to roughly €28 billion in trade. Market reaction has been swift and jittery, with the STOXX Europe 600 index declining as investors brace for possible escalation. According to the Kiel Institute for the World Economy, both Europe and the U.S. stand to suffer economic contractions — around 0.4% for the EU and 0.17% for the U.S. — underscoring the self-inflicted wounds inherent in a prolonged trade war.

Europe’s reaction has been swift and coordinated. At an emergency summit in Paris, European leaders led by France’s Emmanuel Macron emphasized the urgency of defending economic sovereignty. Macron’s call for a robust, unified stance against U.S. economic pressure reflects a broader shift within Europe towards increased self-reliance and strategic autonomy in the face of unpredictable American policy.

As both sides dig in, the global economic order watches uneasily, aware that the conflict’s outcome could reshape international trade, economic diplomacy, and geopolitical alliances in profound ways.

#3

Part of the plan?

In his latest Weekly Market Pulse, Joseph Y. Calhoun III illustrates the jittery, stop-and-go rhythm of markets reacting to President Trump’s unpredictable trade policies. Calhoun argues that the prevailing uncertainty — arising from sudden tariff escalations and ambiguous policy directives — is unsettling investors and undermining long-term growth prospects. Contrary to conventional wisdom that suggests these tariffs incite inflation, he points out that they merely shift prices within the economy, while monetary conditions serve as the primary determinant of overall inflation trends. 

Calhoun disputes Treasury Secretary Bessent’s reasoning that tariffs constitute a necessary “detox,” moving the economy away from government spending towards private-sector strength. He contends this justification is unconvincing, as tariffs themselves signify an intrusive form of state intervention, selectively benefiting specific sectors while undermining the administration’s claimed commitment to free-market principles. By creating new avenues for favoritism and political influence through tariff exemptions and carve-outs, Trump’s policies risk amplifying the very “swamp” he famously vowed to drain.

Calhoun stresses that the greatest harm to businesses lies not only in the tariffs themselves but also in the constant uncertainty they create. Executives increasingly find themselves paralyzed by indecision, hesitant to invest capital when trade policies could change overnight. Calhoun cautions that this volatility, intensified by threats of expanding tariffs to European markets and other strategic sectors, is likely to continue, dampening investment enthusiasm for the foreseeable future.