Due to the imposition of heavy tariffs on the products or trade of many major countries of the world by US President Donald Trump, where a possible trade war is inevitable around the world, there are also fears that many countries will suffer from economic crisis in this “war”. Even before Donald Trump shattered the idea of a western alliance over the weekend, an uneasy spectre had begun to roil through the global economy. As with the onset of any major downturn, global stock and bond markets have begun jumping at shadows, nervously over-reacting to even minor blips in economic events while simultaneously attempting to digest what just a few months ago seemed unimaginable. Troubles are brewing on at least three fronts. The first is the sudden rewriting or even the abandonment of global strategic alliances that have been in place for 80 years. The second is the imminent imposition of yet more US tariffs on American friends and foes alike, a strategy that appears likely to weaken an already fragile global economy still recovering from a global pandemic, the first inflation outbreak in half a century and wars in Europe and the Middle East. Even without those titanic forces in play, overheated financial markets already had become susceptible to a correction. Global markets have become hugely concentrated, as computer generated investment programs have poured money into Wall Street and, more pointedly, into a mere handful of technology stocks. Wall Street has risen almost 55 per cent in the past two years on the back of an expected future bonanza from artificial intelligence, pioneered by just seven mega-cap companies. If anything threatens those earnings projections — such as the emergence of a new player like DeepSeek or even a dose of earnings reality — the prospect of a severe downturn becomes ever more likely. For most of the past two years, the brains behind Berkshire Hathaway, 94-year-old Warren Buffett, has been selling down his stock portfolio. Last year, he sold about $US133 billion worth of shares, including more than 615 million Apple shares, reducing his stake in the tech giant by more than 67 per cent. The only other times Buffett has built a cash reserve anything near that was just before the 2000 tech wreck and immediately before the Global Financial Crisis in 2007. Recent American surveys, from the University of Michigan and from the Conference Board already have seen a marked downturn in consumer sentiment as Elon Musk’s chaotic cost cutting program ramps up. The Musk-led cost cutting has been instituted to engineer a turnaround in America’s massive ongoing budget deficit and ultimately reduce the nation’s crippling $US45 trillion debt. There’s a theory that Trump and his Treasury secretary Scott Bessent wouldn’t be averse to a US recession, as it would force the US Federal Reserve to cut interest rates and thereby reduce the interest payments on that huge debt. Therefore, the economic effects of Donald Trump’s tariff policies depend on several factors, including the scale and duration of the tariffs, how other countries respond, and the overall global economic climate. Based on past tariff policies under his administration (2017–2021), here are some potential global economic impacts if he were to reimpose or expand tariffs would be, higher Costs for Businesses and Consumers. Tariffs act as a tax on imported goods, increasing costs for businesses that rely on foreign materials or components. Companies may pass these costs onto consumers, leading to higher prices for goods, especially in industries like electronics, automobiles, and manufacturing. Trade Retaliation and Global Tensions. Other countries could respond by imposing their own tariffs on U.S. exports, hurting American businesses that rely on foreign markets (e.g., agriculture, aerospace, and technology). Trade conflicts with China, the EU, or other major economies could disrupt global supply chains. Interest rates higher for longer, impacting global investment and economic growth. Tariffs can reduce overall trade volumes, leading to slower global economic growth. Emerging markets that depend on exports to the U.S. and China may suffer from reduced demand. Companies may try to avoid tariffs by moving production to different countries, leading to increased investment in places like Mexico, Vietnam, and India. However, shifting supply chains is costly and takes time, creating uncertainty in global markets. Previous tariff announcements by Trump led to stock market fluctuations, as investors reacted to uncertainty in trade relations.
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