Financial Forecasts April - Trump: hubris & orbi…

It may go down in the annals of history that Easter 2025 brought to an end globalisation (or at least as we knew it). Free trade and multilateralism are giving way to protectionism and power play as, with a few sweeps of his baton, the conductor of the world’s post-war organisation is orchestrating its dismantlement. Trumponomics and its effects on the United States are open to debate, not the negative impact it will have on the rest of the world. Donald Trump has just raised tariffs to levels not seen for a century when the economy (production and consumption) was nowhere near as integrated as it is today (the US economy itself is three times more open than it was then). The so-called discounted reciprocal tariffs are in no way based on the sum of the customs tariffs imposed on American goods, but on the ratio between a country's bilateral trade deficit and its imports. Cambodia obviously does not apply 97% tariffs as contended by the US administration. And it’s perfectly normal for a ‘poor’ country to have a surplus with the US since it exports goods to the US (produced at a lower cost thanks to cheap labour) and can't afford to buy many F-35s or take out Netflix subscriptions..The objective of Trump’s trade war remains a mystery: is it to boost tax receipts to then be able to cut taxes, with customs duties now representing less than 2% of receipts? Is it to bring about a reindustrialisation? To achieve a trade equilibrium? In any case, these objectives are mutually incompatible and if the aim is to have a balanced trade balance with each country, this is impossible and clearly sub-optimal (as pointed out by Ricardo).Under Trump 1.0, customs tariffs were raised to 2.5%. In 2025, there was a tenfold increase and more tariffs are on the way (pharmaceuticals, chemicals, semiconductors and other goods mentioned, and especially punitive tariffs by Trump in reaction to countermeasures, themselves in reaction to his reciprocal tariffs, witness the 125% slapped on China in a tit-for-tat, etc.). Admittedly, one can expect tariff reductions to be negotiated, but at the end of the day customs tariffs will be far higher… Markets are right to be wary, with trillion losses already comparable to those in 2008 and 2020.