Trump's Tariffs

Donald Trump in action!

Overview of Recent Events

April 3rd has come and gone, and Trump has indeed shocked the world with the plunge into a trade war. Sometimes, these so-called big ticket world events seem to be a non-starter. There are ultimately so many pulls and counter-pulls that nothing much actually changes, except in a situation of war.

Why this is an unfamiliar territory to most ?

Political Context

The shock and awe effect of the US elections has not fully dawned on the American people. Consequently, it is no surprise that world leaders from the Euro-bloc, China, Canada, Mexico, and others closely linked with the US economy appear stunned by the pace and direction of Trump's initial 100 days in power.

Ukraine war The unpredictability of events around Mr. Zelensky's visit to the White House with its tragic-comic end did not hide one essential fact from the world. That this war essentially ended the minute the US put up its hand to withdraw financial support. Till now, the Euro-Bloc leaders have not woken up to that reality. America's trade & fiscal deficit How serious is the US deficit ? Has Trump really seen something that the Democrats & even some Republicans just shrugged off all these years? It would seem so. Consider these facts: 1. As of March 12, 2025, the U.S. budget deficit surged, passing $1 trillion for the year-to-date, totaling $1.15 trillion through the first five months of fiscal 2025. 2. The federal government is currently spending roughly $7 trillion and collecting only $5 trillion in taxes annually, resulting in a deficit of a little over 6% of gross domestic product. 3. The national debt is a total of $36.22 trillion. The GDP is $28.83 billion. The US trade deficit narrowed to $122.7 billion in February 2025 from a record high of $130.7 billion in January.    4. And finally, the present value of unfunded obligations for programs like Medicare, Medicaid, and Social Security is estimated at $45.8 trillion. 

So, in conclusion, did Trump act sanely ?

In summary, while the announcement of a trade war can create headlines and stir public sentiment, the actual changes may take time to materialize, and the broader effects may be more nuanced than initially perceived. One sentiment going round in USA is that a Democrats victory in last years' elections would have meant shoving the unpleasant facts under the carpet. The world economy is changing! In 2024, the United States had a significantly larger nominal GDP than China, at approximately $29.2 trillion, while China's GDP was around $18.9 trillion. However, when measured by Purchasing Power Parity (PPP), China's economy is already larger than the US.  But the US has a significantly larger national debt than China, with the US debt reaching $31.4 trillion, while is 106.5% of its GDP. China's national debt is around $14 trillion, which is 66% of its GDP. So, all things considered, a call had to be taken on economic principles. We are living in interesting times !