Top Economist Suggests Trump’s Tariffs Might Have Outsmarted Us All

Aggressive Tariffs Shake Global Trade

President Donald Trump hit the ground running in January, imposing heavy tariffs on key trading partners like Canada, Mexico, and China. Soon after, he expanded tariffs to imports from nearly every country—even an island inhabited only by seals and penguins.

Countries retaliated with their own tariffs, prompting the U.S. to raise levies even higher. China suffered the most, facing tariffs as steep as 145% after President Xi Jinping imposed counter-tariffs. The impact was harsh—Chinese factories experienced protests and temporary closures.

U.S. Economy Shows Strength Despite Fears

Despite fears of a looming recession, the U.S. economy stands strong. On June 27, both the S&P 500 and Nasdaq hit record closing highs, signaling investor confidence.

Economist Reverses Course

Torsten Sløk, chief economist at Apollo Global Management and a vocal critic of Trump’s tariff policies, initially warned in April that the tariffs could trigger a recession and cause thousands of layoffs. However, last week he changed his stance.

On June 21, Sløk blogged that he might have underestimated the strategy behind the tariffs. He explained that the Trump administration’s 90-day deadline for new trade deals sparked market speculation but prolonged uncertainty hurts the economy.

Possible Strategy Behind the Tariffs

Sløk suggested the administration might keep tariffs at 30% on China and 10% on other countries. Then, it could give trading partners 12 months to lower non-tariff barriers and open their markets.

Extending this deadline would allow businesses time to adapt to permanently higher tariffs. This would reduce uncertainty, which could boost business planning, employment, and financial markets.

A Win-Win Scenario?

Sløk concluded that this plan might benefit everyone:

• Trade partners would accept lower, more stable tariffs.

• The U.S. government could generate $400 billion in annual revenue.

• Businesses and markets would gain much-needed clarity.

He wrote, “Maybe the administration has outsmarted all of us.”

Trump’s Long Game

Trump believes the tariffs will pressure countries to reduce trade barriers against U.S. goods. He also hopes tariffs will encourage more domestic manufacturing.

However, consumers in the U.S. might face higher prices as countries retaliate with their own tariffs.

Final Thoughts

In April, Sløk admitted there might be a method to Trump’s aggressive trade stance. Many countries already tax U.S. imports heavily, so Trump aims for a more level playing field.

Will this gamble pay off? Time will tell, but for now, markets seem optimistic.