Trump, the Economic Risk*
Published in Frankfurter Allgemeine Zeitung
(Germany) on 11 March 2025
by Winand von Petersdorff-Campen (link to
original)
The American president is prioritizing domestic production over imports. His policies could lead the U.S. into economic stagnation.
Sometimes, governments need to make cuts. Budget consolidation, for example, can trim the national deficit to a tolerable level. In this case, it is right to argue that a painful transition phase is necessary for a better future. President Donald Trump is using reasoning to play down a plunging stock market, dwindling consumer confidence and growing worries about inflation as the temporary costs of an economic policy that will lead to a golden future. Americans should not buy it.
Trump’s policies are aiming to replace imports with domestic production. Why import cars when you can build them yourself, Trump’s secretary of commerce recently asked. Import substitution industrialization was favored in the 1950s as a recipe for developing countries in Latin America and parts of Asia. Politicians liked it because it entailed ceremonies for opening factories.
Protectionism Corrupts
But it quickly became apparent that import substitution industrialization was a recipe for long-term stagnation and often for ruin. Governments began to protect inefficient domestic industries and exports sank, along with profits.
Moreover, countries that had committed to international trade were soon better off. Thus, first development economists and then politicians eventually abandoned the idea.
Trump has brought back the idea. Thus, he demonstrates not only a refusal to learn from history; his tariff policy is turning corporations into supplicants. They want to do him favors in return for protection or exceptions from trade restrictions.
Those wondering why so many corporations wanted to pay for Trump’s inauguration or why they are increasing their regular investment activity in big shows of support for Trump’s agenda, as Apple has recently done, do not need to wonder anymore. Protectionism is making the U.S. more corrupt. And unfortunately, there is no sign that Trump has a problem with that.
*Editor's Note: This article is available in its original German with a paid subscription.
Sometimes, governments need to make cuts. Budget consolidation, for example, can trim the national deficit to a tolerable level. In this case, it is right to argue that a painful transition phase is necessary for a better future. President Donald Trump is using reasoning to play down a plunging stock market, dwindling consumer confidence and growing worries about inflation as the temporary costs of an economic policy that will lead to a golden future. Americans should not buy it.
Trump’s policies are aiming to replace imports with domestic production. Why import cars when you can build them yourself, Trump’s secretary of commerce recently asked. Import substitution industrialization was favored in the 1950s as a recipe for developing countries in Latin America and parts of Asia. Politicians liked it because it entailed ceremonies for opening factories.
Protectionism Corrupts
But it quickly became apparent that import substitution industrialization was a recipe for long-term stagnation and often for ruin. Governments began to protect inefficient domestic industries and exports sank, along with profits.
Moreover, countries that had committed to international trade were soon better off. Thus, first development economists and then politicians eventually abandoned the idea.
Trump has brought back the idea. Thus, he demonstrates not only a refusal to learn from history; his tariff policy is turning corporations into supplicants. They want to do him favors in return for protection or exceptions from trade restrictions.
Those wondering why so many corporations wanted to pay for Trump’s inauguration or why they are increasing their regular investment activity in big shows of support for Trump’s agenda, as Apple has recently done, do not need to wonder anymore. Protectionism is making the U.S. more corrupt. And unfortunately, there is no sign that Trump has a problem with that.
*Editor's Note: This article is available in its original German with a paid subscription.
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