Tariffs, sanctions, state participation – US President Trump is bringing out the big guns in economic policy. He's concerned with more than just a strong America. He wants a new economic order.
US President Donald Trump knows how to make a splash with what he does and how he does it. His goal is to"Make America Great Again."
The pace at which he is doing this could take your breath away - especially when you consider that it is not just about better economic management in the USA, but also about reshaping global trade relations, according to economist Rolf Langhammer of the Kiel Institute for the World Economy.
"So far, Trump has always operated according to the principle—and this was also true during his first term—that we all lose, but the US loses the least," Langhammer said."So it's a kind of negative-sum game. And then I'm the winner."
Import duties and sanctions
To be a winner – important tools for the American president are the imposition of import tariffs or sanctions. He resorts to such measures, for example, when states fail to behave as he believes they should.
India, for example, continues to buy Russian oil, thereby indirectly financing Russia's war against Ukraine. As punishment, tariffs on imports from India have been doubled to 50 percent. Another example is China. Trump is threatening punitive tariffs of up to 200 percent if the Chinese fail to reliably supply the United States with rare earths. Rare earths are essential for the construction of smartphones, wind turbines, and electric cars.
Export restrictions for US corporations
The US, for its part, is also imposing export restrictions – for example, on chips to China. The goal is to prevent the Chinese from overtaking the Americans in technical and technological terms. Such measures primarily affect their own industry.
Chip developer Nvidia is feeling the effects. The company builds high-performance chips needed for artificial intelligence applications."For a long time, the White House's export restrictions were in place, so they could only sell inferior products there," says Chris-Oliver Schickentanz of Capital AG."They now have permission again to export at least the high-performance chips designed specifically for the Chinese market."
For Nvidia, this means one thing above all: great uncertainty. The company has already been very cautious about its own business forecasts.
US government wants to be involved everywhere
It's already becoming clear that US President Trump is not only transforming his own country, but also destroying the international trading system—that is, the trading order as it has functioned for decades—through tariffs, sanctions, and export restrictions. Expert Langhammer from the Kiel Institute for the World Economy speaks of a"fragmented trading market with fragmentations that only generate costs everywhere."
And something else is becoming increasingly clear. For a long time, America was considered a bastion of the free market. State influence over companies or institutions was unimaginable, or at least permitted only in extreme emergencies.
But that, too, is changing. The US government is now acquiring a stake in the struggling chip company Intel. The government also intends to acquire a stake in the defense company Lockheed Martin. Then there's the massive pressure Trump is exerting on the US Federal Reserve because he wants interest rates in the US to be lowered. The horrendous US debt must remain affordable.
Attacks on the business world
Trump isn't exactly squeamish in his attacks. He's called on Intel CEO Lip Bu-Tan to resign because of his ties to Chinese companies. Apple CEO Tim Cook has faced criticism for having iPhones sold in the US manufactured abroad.
Trump also criticized the investment bank Goldman Sachs and demanded the resignation of German chief economist Jan Hatzius. He accused the bank of making an incorrect forecast. Trump also fired Federal Reserve Governor Lisa Cook. No US president has ever done such a thing.
"Europe must emancipate itself from America"
Economist Martin Lück observes all this with concern."We're talking about the world's largest economy, we're talking about the world's largest military power, and we're also talking about a society that has tremendous soft power." For decades, the best minds from Europe and Asia have wanted to move to the United States to pursue careers there, the expert says."And this society is currently imploding."
The financial markets are reacting. Stock indices around the world are repeatedly coming under pressure. The US dollar has lost value. It's becoming more expensive for the US to borrow money on the capital market.
The situation could escalate further in the coming months as the consequences of Trump's actions become increasingly clear. For many economists, there is only one conclusion: Europe must emancipate itself from America and focus on its own strengths.
