Liberation Day: Trump’s tariff offensive threatening the global economy

The history of the global economy has just reached a new milestone. US President Donald Trump announced 'Liberation Day' this week alongside an ambitious and controversial tariff plan that imposes levies on more than 90 countries. This move not only represents the largest protectionist shift since the 1930s, but also turns the world’s leading power into the country with the highest tariffs. 

“Liberation Day has dealt a brutal blow to the economic and globalization model that companies have operated under in recent decades,” says Pedro Aznar, Associate Professor in the Department of Economics, Finance and Accounting at Esade. “The last time the US applied similar tariffs was in the period between the First and Second World Wars.” 

Trump’s tariff list imposes a base rate of 10% on all imported goods, although for some countries the rate is much higher. These include members of the European Union, which face a 20% rate; Vietnam, at 46%; and China, which reaches 54% if existing tariffs are included. The US’s main trading partners, Mexico and Canada, are not on the list, although at the beginning of his term, Trump announced plans to impose a 25% tariff on them, which he has later used as a bargaining tool. 

A period of economic instability begins, with stagflation a very likely outcome

Aznar emphasizes that the impact will be immediate in countries heavily exposed to the US market, such as Germany or Ireland, where the new 20% tariff on their exports could result in lower sales, pressure on corporate margins, reduced investment, and job losses. He also anticipates retaliatory measures that will worsen global financial uncertainty. “From a macroeconomic perspective, this means lower growth prospects, a deterioration of business confidence, and higher inflation,” he concludes. 

Impact of the tariffs on the EU and Spain

At the international level, the risk is clear: an escalation of retaliations leading to a global trade war. According to Omar Rachedi, also an Associate Professor in the Department of Economics, Finance and Accounting at Esade, this situation “would slow global trade and could dampen economic growth in many regions.” 

Although the direct impact on Spain would be limited — around 0.2% of GDP in the short term — certain key sectors such as machinery, electrical equipment, and olive oil would suffer from the loss of preferential access to the US market. Moreover, given Europe’s deeply integrated industrial structure, the indirect damage would be considerable: many exports from countries like Germany or France include Spanish components, so a hit to these value chains would affect the entire continent. 

Reciprocal tariffs?

Trump has defended the plan as “reciprocal” tariffs aimed at balancing what he sees as the unfair treatment the US receives from its current trade partners. The problem is that these calculations were not based on the tariffs or general taxes that other countries impose on the US, but rather on America’s trade balance — the difference between the value of imports and exports — with each partner. 

The term 'reciprocal' is misleading: these are unilateral and disproportionate tariffs, criticized for their lack of rigor

For partners with whom the US has a large trade deficit, like China or the European Union, the tariffs are higher. In contrast, for countries with which the US has a trade surplus, like the United Kingdom, the base 10% tariff applies. According to Rachedi, this is a completely opaque way of setting tariffs. “The term 'reciprocal' is misleading: these are unilateral and disproportionate tariffs, heavily criticized for their lack of economic rigor,” he states. 

Moreover, far from ending the uncertainty surrounding the imminent announcement of the tariff plan, its final form only increases it. “Since the calculation depends on the bilateral trade deficit, if companies’ investment decisions alter that deficit, it could trigger new rounds of tariffs. These are not stable rules, and this greatly complicates the planning of resilient supply chains,” Rachedi explains. 

He also points out that it is a mistake to design this kind of policy with a focus on bilateral trade balances — those with individual countries — instead of the aggregated balance with the rest of the world. Bilateral deficits or surpluses simply reflect the principle of comparative advantage: countries specialize in selling what they produce best while buying what others can produce better or more cheaply. 

“Setting bilateral tariffs undermines these patterns of specialization, will have significant negative effects on global trade, and is not justified at all,” Rachedi adds. 

The cost for US households

Both experts agree that the final bill will be paid, above all, by US citizens. Aznar warns that the tariffs will directly affect the prices of basic goods in the consumer basket, from mobile phones to coffee. Rachedi estimates the impact in concrete terms: an additional $2,400 to $3,400 per year for every US household, a burden that will hit low-income families the hardest. 

Beyond consumers’ wallets, the macroeconomic effects will also be negative within the country: higher costs for businesses, inflationary pressures that could force the Federal Reserve to raise interest rates, and erosion of net employment. And of course, there is the possibility that affected countries will respond with genuinely reciprocal tariffs. 

It is doubtful that industries will return en masse to the US because of the tariffs

“Far from strengthening it, this measure threatens to drag down the US economy as a whole,” says Rachedi. “While protected sectors — such as steel or automobiles — might see temporary relief, other industries will suffer from higher input costs and external retaliation, eroding net employment.” He also points out that it is highly unlikely these measures will achieve their stated goal of reducing the trade deficit, since this is driven by structural internal factors such as low savings rates and high public deficits, which cannot be corrected through tariffs alone. 

And what about the much-desired reindustrialization at the heart of this tariff plan? Will companies return to producing in the US, as Trump hopes? Professor Rachedi finds it “doubtful” that they will return en masse because of the tariffs. “In practice, companies might opt for suppliers in other, less-penalized countries instead of bearing the costs of relocating their factories to the US” 

An attack on the international trade order

Finally, both Aznar and Rachedi agree that this “Liberation Day” represents a direct threat to the international trade system built after World War II. Trump, they argue, is not only breaking with economic logic by viewing trade deficits as a “scam” by other countries, but is also undermining the principles of openness, cooperation, and respect for multilateral institutions like the World Trade Organization. 

“If other countries respond in kind, we could see an escalation of barriers that reverses the integrative trend of globalization,” says Rachedi. The result would be a more fragmented world, with lower growth, less trust between countries, and a weakened system for resolving trade disputes. 

“In short, we are entering a period of economic instability, with a very likely outcome of stagflation, combining higher prices with lower economic growth,” Aznar predicts.