Economic reality bites Trump and his trade protectionist policies

Georg Riekeles knows about hard ball trade negotiations: in a long and hard negotiation, terms about the UK leave The EU is an advisor to the EU’s chief negotiator Michel Barnier. Back in April, when Riekeles saw President Donald Trump issued an order that was subsequently suspended to impose a 20% blanket tariff on EU exports to the United States, he had a clear view on how Europeans should respond: By threatening the massive responsibility of U.S. exports to Europe. That’s what China does, and it seems possible that other major U.S. trading partners are forced to surrender. “EU negotiators need to prepare a wide range of retaliation packages,” Riekeles, now deputy director of the European Policy Centre, told me this week.

The EU does fight back by exerting a lot of duty on some iconic American goods, including Kentucky bourbon and Harley Davidson motorcycles. It then threatened to expand its taxes to US aircraft, auto parts and certain other products. But ultimately, it blocked blanket tariffs that threatened Trump’s style and invoked the EU’s new anti-stubborn instrument, a policy tool launched in 2023 to deal with external economic pressures that would allow IT to target U.S. banks and tech giants such as Google and Google, such as Google and Meta, which have a massive business in Europe. Riekeles refers to European Commission President Ursula von der Leyen, who said: “They have never really been given a real punitive program.”

Earlier this week, the White House announced a unilateral framework agreement in which most European goods entering the United States face a 15% tax. The EU has agreed to eliminate all relevant taxes on U.S. industrial products, invest $600 billion in the U.S., and greatly increase the purchase of U.S. energy products and military equipment. “It was a very disastrous result, it was a surrender and humiliation,” Riekeles said. “The EU leader has not fully measured Trump’s trade policy and his presidency.”

Of course, in Trump’s narrative, his goal is to restore U.S. manufacturing, reduce trade deficits and increase revenues. Last month, with the stock market’s new highs, some economic indicators showed that the entire economy performed well under his tariffs under strong attention. “Fake news and so-called ‘experts’ are wrong again. Tariffs make our country ‘prosper’.”

A series of economic reports released this week illustrates the emptiness of Trump’s claims. On Wednesday, the Ministry of Commerce released figures showing that GDP growth slowed sharply last year in the first half of 2025. The crazy efforts of businesses and consumers to create Trump’s highest tariffs by ordering foreign-produced goods before the tax takes effect, distorting quarterly GDP figures, suggesting that the economy is growing at a seemingly healthy rate between 3% from January to March each year and between April and June. If the numbers are combined to correct the distortion, they show GDP has expanded at 1.3% over the past six months, compared to 2.8% in 2024. This is a big drop.

Given all the uncertainty created by the chaos in Trump’s new tariff regime, it’s not surprising that employers have thought twice about hiring workers. The June official jobs report, released a month ago, showed weakness in many private sector industries, but the scale of the overall slowdown was unclear until the July report was released on Friday. In addition to seasonal agricultural labor, employers created 70,000 new jobs last month, smaller than Wall Street expected. But the real shock is the revised estimates for May and June, which suggests monthly job growth has dropped below 20,000. This is equivalent to virtual stagnation. From the past three months, employment growth has been weaker than any comparable period since Coronavirus-19 pandemic.

Trump’s initial response to the work report was to renew his attack on the Fed, with his chairman Jerome Powell not demanding interest rates. “Powell was a disaster,” he wrote in Societies immediately after releasing work figures. Later in the day, Trump announced again that he was firing a commissioner from the Bureau of Labor Statistics, which produces monthly employment reports. In another article, he tries to justify this unprecedented step by claiming that July’s work numbers were manipulated to make him and other Republicans look bad.

The reality is that BLS is composed of statisticians and other data experts, many of whom are professional civil servants, who do their best to produce accurate numbers. Even by his standards, Trump’s efforts to find a scapegoat are sad. As for the Fed’s stability in benchmark interest rates at a policy meeting earlier this week, it’s not responsible for the fact that many companies deal with Trump’s tariffs by insisting on hiring and starting to raise prices. Another economic report released this week showed that inflation in June was 2.6% from 2.4% in May, as captured by the Fed’s preferred metric. This means inflation still exceeds the Fed’s two-point target and points to a possible return of scatteredness, with price gains accelerating while the economy stagnates.

Sometimes, Trump and his economic advisers show that the economy suffers short-term pain in exchange for raising tariffs and lowering the trade deficit can be a worthwhile trade-off, with GDP totaling more than 3% in four of the past five years, and while this parameter seems somewhat intuitive, it is difficult to back up, which is difficult to back up. “The data shows there is no relationship between trade balances and tariffs,” Joseph Gagnon, an economist at the Peterson Institute for International Economics in Washington, told me. Gagnon added that Trump’s policy agenda “is based on a wrong premise.” Trump’s tariffs can reduce the trade deficit, that is, the gap between imports and exports is ultimately putting the economy into a full-scale recession. But if this happens, the narrowing of the gap has nothing to do with eliminating foreign trade barriers: This will be because American consumers and businesses spend money on all goods, including imported goods.

While Americans are nervously awaiting whether this is the future that awaits their future, many in other countries are engaged in the development of the world with the U.S. government of the open trading system to operate the racket that is essentially globally protected. “It’s about mandatory and mandatory negotiations,” Riekeles said. “The U.S. government is taking a method that doesn’t take into account any rules or prior commitments, but is based purely on power. It might be right. If you can get something by applying pressure, do it.”

Taxes will be imposed on dozens of countries starting next Thursday, according to a series of execution orders signed by Trump this week. As expected, most reports on Trump’s trade policy against major U.S. trading partners, such as Canada, Mexico, Japan, India and the EU, but the list of places where its products will be subject to tariffs include poverty-sized blocks Chad and Lesotho; Laos and Iraq, both countries certainly have suffered enough in the U.S. action to face 40% and 35% tariffs.