The Tariffs Have Side Effects — For the US Too*
Published in Frankfurter Allgemeine Zeitung
(Germany) on 23 August 2025
by Gerald Braunberger (link to
original)
Donald Trump’s tariff policy is hurting globalization. But the U.S. president will not end it. Europe needs to take advantage of that.
The joint statement by the European Union and the United States about a bilateral tariff agreement once again evoked expressions of disappointment and anger in Europe about an agreement seen as disadvantageous from a European perspective. But Donald Trump’s tariff policy is not positive for the United States, either, even if he can boast about foreign commitments to buy energy and weapons and invest in the United States.
Limitations on international trade are economically disadvantageous with few exceptions, as we know from a 200-year-old theory of the British economist David Ricardo — for all affected national economies. Trump wants to keep price increases caused by the tariffs away from American consumers, but in this case, businesses will pay for the tariffs in the form of reduced profit margins. Stagflation, a combination of rising prices and a weak economy, is a possible scenario.
The theory about economic damage from restrictions on foreign trade is usually countered with reference to the first globalization before World War I, when tariff increases in many countries, including the German Reich, did not noticeably slow the growth of the global economy. However, the tariff increases were accompanied by dynamic technological advances that markedly reduced the costs of transporting goods by boat and train.
To transfer the experiences of that time to today’s situation there would need to be particularly great incentives for businesses trading in goods to use advances in the digital revolution for their production and distribution operations. Similarly, the trade in services, which has been much less affected by Trump’s fury, will likely profit more than the trade in goods. Trump may hurt globalization, but he will not end it. For the economy in Europe, everything depends on making the most out of these changes.
*Editor's note: This article is available in its original language with a paid subscription.
The joint statement by the European Union and the United States about a bilateral tariff agreement once again evoked expressions of disappointment and anger in Europe about an agreement seen as disadvantageous from a European perspective. But Donald Trump’s tariff policy is not positive for the United States, either, even if he can boast about foreign commitments to buy energy and weapons and invest in the United States.
Limitations on international trade are economically disadvantageous with few exceptions, as we know from a 200-year-old theory of the British economist David Ricardo — for all affected national economies. Trump wants to keep price increases caused by the tariffs away from American consumers, but in this case, businesses will pay for the tariffs in the form of reduced profit margins. Stagflation, a combination of rising prices and a weak economy, is a possible scenario.
The theory about economic damage from restrictions on foreign trade is usually countered with reference to the first globalization before World War I, when tariff increases in many countries, including the German Reich, did not noticeably slow the growth of the global economy. However, the tariff increases were accompanied by dynamic technological advances that markedly reduced the costs of transporting goods by boat and train.
To transfer the experiences of that time to today’s situation there would need to be particularly great incentives for businesses trading in goods to use advances in the digital revolution for their production and distribution operations. Similarly, the trade in services, which has been much less affected by Trump’s fury, will likely profit more than the trade in goods. Trump may hurt globalization, but he will not end it. For the economy in Europe, everything depends on making the most out of these changes.
*Editor's note: This article is available in its original language with a paid subscription.
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