Trump’s tariffs: brilliant or folly?

Murray Hunter


Trump’s tariffs: brilliant or folly?


Apr 03, 2025





US President Donald Trump signed an executive order on April 2 to invoke reciprocal tariffs of 49 countries where the US either has a deficit in goods trade, or non-tariff barriers exist against US goods. In his oval office speech called “Make America Wealthy Again”, Trump declared the “Liberation Day”.

The objective of the rise in tariff rates is to correct the imbalances of trade between the United States and the countries tariffs have been imposed upon.

It appears a simple formula has been used. The new tariff rates look like they have been calculated from the US trade deficit with each country and divided by the country’s exports to the US. Any country that had a trade surplus or trade deficit of less than 10%, were given a tariff rate of 10%. In those countries, issues concerning non-tariff barriers were factored in.

Many countries have been imposing massive tariffs on individual items such as food, beverages, dairy products, and beef, or place either bans or major hurdles on the import of US items.

In 2024, US goods trade deficit with the world amounted to USD 1.2 trillion.

For months, economists and journalists have been sounding disaster and the end of the world to the expected tariff imposition by Trump. They highlighted the potential rise inflation, decrease in demand, and possible downsizing of industries that would create unemployment.

Very few actually talked about the unfairness of some tariffs upon US goods, and the difficultly of US companies entering these markets.

Conventional economics states that a tariff would alter competitive advantage, leading to the higher price of goods and inflation. Tariffs are a tax on US consumers, levied on the arrival of goods into the US. Its US consumers who pay these taxes and they will be the ones penalised. This would lead to a cut in consumption and recession.

The Trump administration’s hope is that tariffs will attract manufacturing back to the United States, creating new employment opportunities. However, the aim of these ‘Liberation Day” tariffs is to force reciprocal countries to lower their tariffs and dis-assemble non-tariff barriers.

In the ASEAN region, Thailand was hit with a 37% tariff hike, Cambodia 49%, Laos 48%, Myanmar 44%, Indonesia 32%, Brunei and Malaysia 24%, the Philippines 18%, and Singapore 10%. China was hit with 34%, India 26%, the EU 20%, and the UK and Australia 10%.

Countries like South Korea were hit with tariffs because of the restriction of imports of US cars into the market, Japan’s ban on US rice imports, and Australia’s ban on US beef imports.

Although China and the EU are talking about retaliation, most countries are reducing their tariffs. Vietnam, which has a large bilaterial trade surplus with the US of $123 billion in 2024, has slashed its tariffs on US goods. India is considering the reduction of tariffs, while Israel has already done so.

Due to the difficulty of dis-assembling non-tariff barriers like APs, and Bumiputra quotas, and other trade restrictions, the Malaysian Government is in a quandary of what to do. Such non-tariff barriers have traditionally allowed trade to be undertaken by selected companies, such as Bernas which has a rice import monopoly. Malaysia is also without any ambassador to the US. There are many others.

Trade blocks and inter-government organizations such as ASEAN have been weakened by Trump’s tariff move. There is no time for ASEAN to make a common stand and it would be highly unlikely any multi-government group would be able to come to any common position. The Trump tariff move is focused on bilateral relations.

The immediate response of markets around the world have been negative. One can be sure that there are now many calls being made to Washington, with countries offering deals. If the Trump administration can do these deals, then the use of tariffs for business negotiation was a brilliant idea. If a trade war is the result, then the whole exercise has been a folly.