Tariffs and Escalating Trade Disputes

Since assuming office on January 20, President Trump has threatened or initiated a wide variety of tariffs, targeting specific countries and industries. On March 4, the US government enacted new tariffs on goods from Canada and Mexico and increased broad-based tariffs on Chinese imports. The Trump administration has threatened further tariffs on several targets, including the European Union (EU), India, Japan, Venezuela, and Colombia. On March 12, the US also began imposing tariffs of 25 percent on imports of steel and aluminum products and implemented tariffs on automobiles and automotive parts as of April 2.

The Trump administration has given various reasons for both actual and threatened tariffs. Many government communications stress tariffs as a way of redressing alleged economic imbalances and injustices, including targeted countries' existing tariffs on US imports and export surpluses with the US. Underscoring these points has been the assertion that other countries are taking advantage of the US in trade and that America must protect and re-establish its manufacturing capacity. However, the Trump administration has also connected new tariffs with grievances that are not strictly economic. Finally, the Trump administration has argued that tariffs are a fiscal instrument for government revenue that could at least partially reduce the need for Americans to pay income tax. 

In sum, US tariff policy has three main motivations: economic protectionism, particularly of heavy industry, political coercion, and revenue generation.

Increased tariffs and non-tariff barriers (NTBs) have led to trade and economic disruption in the US and abroad. Modern supply chains are frequently widely distributed across borders, with raw materials, refining, component manufacturing, and final assembly occurring in several countries. For example, in the automotive industry, a single component may cross international borders up to seven times before its final manufacturing. The effects of tariffs are cumulative, as they are repeatedly applied during multiple crossings of borders. This will increase not only manufacturer costs but also procedural requirements, slowing the movement of goods between the US and other countries and leading to supply shortages.

While the longer-term ambitions of the Trump administration are to create incentives for manufacturers to relocate capabilities to the United States, this would be a capital- and time-intensive process, meaning that, at best, reshoring manufacturing would take a significant period to enact. In both the US and targeted countries, a trade war would likely increase inflation and have a cascading effect, leading to economic slowdown and layoffs.

The ramifications of the April 2 tariff hike go beyond trade; they threaten to increase tension between the US government and many others worldwide. 

The Impact on Travel and the Movement of People 
This may make the movement of personnel more difficult. Border agents may apply enhanced scrutiny to visitors, denying entry or even detaining individuals. Governments may impose new requirements for entry or necessitate a formal visa. The Trump administration has discussed the possibility of introducing new restrictions on citizens from at least 43 countries, with 11 nationalities being wholly banned from entry. It is a strong possibility in the coming months that other governments will introduce greater restrictions on American visitors.

Limiting Access to Natural Resources 
As a trade war gathers momentum, there is also a distinct possibility of nations punitively restricting access to strategic resources, including metals and energy. Even before President Trump's inauguration, on December 3, 2024, China banned US-bound exports of gallium, germanium, and antimony, critical minerals for which Chinese supply is dominant. This was in response to the Biden administration's restriction of AI chip exports to a variety of countries, including China. In March, the Canadian province of Ontario enacted export tariffs on electricity to the United States, threatening to completely cease electricity exports if US tariffs worsened. Government sources in Canada also discussed the possibility of restricting or taxing exports of heavy crude oil and natural gas. These examples display the possibility that governments could "weaponize" critical natural or technological resources, disrupting access at short notice. In a world of widely distributed supply chains and interdependency, manufacturers and national economies alike could be suddenly and severely affected.

Trade conflicts may lead to governments excluding US vendors from public procurement or servicing programs. They may also result in reduced inter-governmental cooperation. In the worst case, they may exacerbate geopolitical tensions and lead to degraded diplomatic relations between the US and other countries.

A period of growing international political tensions and economic challenges would raise the likelihood of adverse societal repercussions. Civil unrest will probably become more frequent and severe if the US or other countries experience notable inflation, a recession, or layoffs. The US has already seen protests against the Trump administration, and notable economic hardship would only intensify this. Increased unemployment in the case of an economic downturn would also likely lead to heightened crime.

Regardless of the economic effects of a trade war, anti-American sentiment is almost certain to increase globally. Demonstrations near US embassies and consulates, as well as vandalism of identifiably American companies or properties, have already occurred in North America and Europe. Heightened protests and vandalism targeting American organizations are likely worldwide. Moreover, popular boycotts of American goods have already occurred in North America and Europe and will probably grow as trade tensions increase.

President Trump's growing use of tariffs is intended to enhance American economic power, political clout, and fiscal health. However, in the short to mid-term, their use may bring a significant risk of disruptions to trade, manufacturing, and economic health, both in the US and abroad. Organizations should prepare for growing turbulence in the movement of goods and people and inter-governmental and popular friction.

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