The double-edged sword of tariff war; an earthquake on Wall Street and a tremor in the world economy

According to Ashura News, quoted by Mehr News Agency, International Group, Hassan Shokohi Nasab: On the day that is named "Freedom Day" (April 2, 2025, equivalent to Farvardin 13, 1404), US President Donald Trump shocked the world by publishing a long list of tariffs between 10 and 50 percent on 60 countries.

Trump imposed a global "base" 10 percent tariff on all goods imported into the United States, and some countries and global players were severely affected by the tariff war. For example, the European Union faced a 20 percent tariff, while countries such as Vietnam (46 percent), Bangladesh (37 percent), Cambodia (49 percent), Malaysia (24 percent), China (34 percent), Taiwan (32 percent), Japan (24 percent) and Lesotho (50 percent) were severely affected.

The global economy is in tariff shock; Trump and the Challenge of Free Trade in the 21st Century

Trump's tariff war, which has been launched just two and a half months after he assumed the presidency of the United States, has provoked strong reactions not only within the country but also from countries, international institutions and global markets. From the perspective of observers, its consequences even affect the future of the international trade order.

The double-edged sword of the tariff war; an earthquake on Wall Street and a tremor in the world economy

1. A counter-wave of tariffs; the beginning of a new round of trade war

Following the announcement of Trump's tariff policy, many of America's trading partners have taken retaliatory measures. The European Union, a long-standing US ally, has announced that it will impose reciprocal tariffs on American goods, including agricultural products and automobiles.

For example, British automaker Jaguar Land Rover announced that it would suspend shipments to the country for a month due to Trump’s “new trade conditions” of 25 percent tariffs.

In addition, as global concerns about the economic recession caused by the new US tariffs intensify, the British government has begun efforts to form an international coalition to counter the White House’s controversial policies and defend the global free trade order.

China, which is seen as America’s major rival, has faced Trump’s 34 percent tariff and has warned that if this trend continues, it will impose new tariffs on energy, technology, and agricultural imports from the United States. In a report, the country’s Global Times newspaper quoted the Customs Tariff Commission of the State Council of China as saying that Beijing will impose an additional 34 percent tariff on all goods imported from the United States starting next week, based on current tariff rates. According to the report, the additional tariffs will be implemented from April 10 (April 21).

Mexico, Brazil, India and Indonesia are also considering similar measures. On the other hand, Venezuelan President Nicolas Maduro announced in relation to the customs tariffs imposed on his country by the United States: Caracas will overcome Trump's trade war.

These chain reactions, only a few of which were mentioned, have increased the risk of a full-scale trade war and reduced the predictability of the global economy.

2. Decline in global economic growth; warning of the International Monetary Fund and the World Trade Organization

Following the implementation of the tariffs, the International Monetary Fund (IMF) has reduced global economic growth in 2025 from 2.9% to 2.3% in its new report. The World Trade Organization (WTO) has also warned that the volume of international trade has decreased by about 5.6% in the first half of this year. Global markets have also experienced heavy fluctuations on several occasions, and European and Asian stock market indices have experienced an average decline of 3 to 5 percent during March and April.

3. Disruption of global supply chains and rising prices of intermediate goods

The implementation of extensive tariffs has disrupted international supply chains that are heavily dependent on cross-border connections. Among the specific consequences of these disruptions are the increase in production costs in developing countries, which have relied on the United States for a large part of their exports. In addition, the slowdown in the transfer of parts and raw materials in the technology, automotive and pharmaceutical industries, as well as a 15-20% increase in the final cost of some export products in Asia and Latin America, are other consequences of this tariff battle.

4. Concerns in the oil, energy and commodity markets

The increase in trade tensions and instability in the supply chain have also affected global energy markets. For example, the price of Brent crude oil initially fell below $72 in response to the announcement of tariffs, but then rose again due to concerns about a decrease in global supply. In recent days, global oil prices have fallen by about 8% after China announced an increase in tariffs on American goods, the lowest oil price since the middle of the COVID-19 pandemic in 2021.

In addition, the prices of metals such as aluminum, steel, and copper have increased by 8 to 12% due to increased import costs and sluggish exports. The market for basic commodities has also experienced fluctuations that are very worrying for countries dependent on food imports.

5. Reaction of international institutions and weakening of the US position

International institutions including the World Trade Organization, the International Monetary Fund, and the World Bank have expressed concern about Trump's approach. They have emphasized that the US's unilateral tariff measures are contrary to the principles of global free trade. In addition, there is a possibility of an increase in official complaints against the US within the framework of the World Trade Organization. China's permanent representative to the World Trade Organization recently announced that it has submitted an official complaint to the organization against the new US tariffs, considering that the US actions violate WTO rules. In addition, other countries may move towards the formation of new trade blocs without the United States (such as strengthening the BRICS, Shanghai or Asia-Pacific regional pacts). This trend could weaken the United States' position as the center of global trade in the long term.

The shadow of tariffs on the US economy; historic decline in indicators and rising production costs

In recent days, many media outlets, domestic and foreign officials, as well as the American people, have warned about rising prices in this country.

The British newspaper "The Guardian" wrote in a warning report: The day that US President Donald Trump called the day of economic freedom will be a day of stagnation in America and suffering for people around the world. His decisions, which are more like the revenge of a vindictive person than calculated economic policymaking, could lead to a recession in America and pressure on weak economies around the world.

Senate Minority Leader Chuck Schumer has strongly criticized President Donald Trump's new tariff policies, warning that tariffs and a global trade war will increase costs for Americans and that this situation is a disaster.

Paul Krugman, a prominent American economist, described Trump's actions as the demands of a mad king and said: The Trump administration's argument for these tariffs is completely contradictory, because on the one hand it claims that prices will not increase and on the other hand it expects to earn hundreds of billions of dollars in revenue from this.

Jerome Powell, the chairman of the US Federal Reserve, has also warned that Trump's policies could slow the country's economic growth and keep inflation higher than expected.

Mark Zandi, an American economic analyst, also predicted that Trump's tariffs will soon lead to a recession, and this recession will continue until next year. US economic growth could fall by 2% and the unemployment rate could reach 7.5%.

1. Unprecedented collapse of US financial markets

In direct response to the announcement of the new tariffs, US stock markets suffered a historic decline, with the S&P 500, Nasdaq and Dow Jones indices all falling.

In this regard, CNBC referred to the Trump administration's 10% tariff on all US trading partners and wrote: The 10% tariff will take effect on Saturday, and specific rates for 60 other countries will take effect within the next week.

The English-language media added: Trump's decision increases the US effective tariff rate from 2.5% to more than 20%, the highest level since 1910 and even higher than the Smoot-Hawley tariffs of 1930, which helped exacerbate the Great Depression.

CNBC pointed to the historic fall of the indices and the 5.97% drop in the S&P 500, the lowest level since 2023, and added: The Nasdaq also fell 5.82% and the Dow Jones experienced a decrease of 3,900 points in two days, which is unprecedented.

From the perspective of observers, this heavy drop not only undermined investor confidence, but also caused a significant decrease in the value of pension assets, investment funds and equity shares of millions of Americans.

CNBC, according to economists, called Trump's tariff action the biggest political mistake in the last 95 years and quoted Paul Krugman, a prominent American economist, as saying: These tariffs are more like the demands of an autocratic monarch than rational economic policy.

2. Rising Inflation and Pressure on Consumers

The imposition of high tariffs on consumer goods from Asian, European, and Latin American countries has directly increased the prices of everyday goods in the United States. Some of the recorded or estimated effects include a 1.3 to 2.1 percent increase in the Consumer Price Index (CPI) in just one month; an increase in the average annual cost for households of up to $1,750 (based on calculations by independent economic analysis centers); and a rise in the prices of certain goods such as clothing, household appliances, and imported cars in some states of up to 25 percent compared to the previous month. These price increases have occurred at a time when many Americans are still struggling with the consequences of inflation in 2021-2023.

3. Concerns of domestic industries; production has not only not become cheaper, but has become more expensive

Contrary to Trump's goal of supporting domestic industries, many American manufacturers have warned that the increase in tariffs has actually increased the price of imported raw materials and parts, reducing their competitiveness. For example, technology and component assembly companies have announced that production costs have increased by up to 18%. Some factories, such as home appliance manufacturers in Ohio and Wisconsin, announced that they have been forced to reduce work shifts and lay off some of their workforce. The American Metal and Auto Manufacturers Association warned in a statement that if the current trend continues, more than 250,000 jobs will be at risk by the summer of 2025.

4. Social protests and political criticism at home

The reflection of these policies in public opinion has also been negative. According to a survey conducted by a research institute, about 58% of Americans consider Trump's tariff policies to be the cause of inflation. Only 32% of independent voters support the continuation of these policies. The Farmers Union, the American Chamber of Commerce and some Republican governors, including in Texas and Arizona, have explicitly criticized these policies. In addition, in states such as Iowa and Illinois, farmers have held protest rallies and demanded a review of the government's trade policies.

5. Financial consequences; the threat of recession and a growing budget deficit

The stock market crash, rising inflation and pressure on domestic consumption have put the US Federal Reserve in a difficult position. Although interest rates have been kept unchanged for the time being, analysts have warned that if this trend continues, the economic growth rate in 2025 may fall to less than 1 percent. The economic recession is likely to reach 45 percent by the end of this year. In addition, if it is necessary to pay out further support packages to damaged industries, the US budget deficit may increase to $ 1.8 trillion.

Overall, statistical evidence, surveys, and market reactions show that Trump's tariff policy in the second administration has not only failed to help the economy prosper, but has also increased pressure on various sectors and increased the risk of the US economy entering a new recession. In such circumstances, the slogan of "supporting domestic production" has in practice led to an increase in the cost of living, a decrease in employment, a decline in the market, and financial instability. If the current trend continues, the Trump administration will face a huge challenge in maintaining the support of the middle class, economic stability, and social peace.