Protectionism and the Global Economy in 2025

Protectionism and Its Impact on the U.S. Economy

Protectionism is not the right economic solution for America’s economic challenges. It involves imposing tariffs on imports from trade partners, which in turn raises the prices of imported goods and services. Higher tariffs lead to higher inflation, directly impacting the American consumer. This contradicts Trump’s campaign promises, which emphasized lowering costs for American households. Ultimately, the American voter will be the biggest loser under such policies.

Protectionism vs. Global Trade Principles

Protectionism contradicts the core principles of the WTO, which advocate for the free movement of goods and services across national borders. It also undermines globalization, a process the U.S. once promoted to developing nations, urging them to improve their products or risk being excluded from global supply chains. However, in a surprising shift, some developing nations—particularly China—have become fierce competitors to U.S. products, especially in industries such as electric vehicles and artificial intelligence.

One notable example is China’s cross-border payment system, which has dramatically reduced transaction costs by 98% compared to Western alternatives like SWIFT, while also cutting settlement times from three to five days to just a few seconds. This technological efficiency gives China a significant competitive edge.

The Contradiction with Capitalist Principles

Capitalist theory emphasizes economic freedom and the idea that prices should be determined by market forces of supply and demand. However, protectionism restricts free trade by interfering in the pricing of goods and services. This raises fundamental questions about the feasibility and sustainability of capitalism in achieving long-term economic growth and social prosperity.

Will U.S. Trading Partners Accept Protectionism?

America’s trade partners will not remain passive in response to U.S. protectionist policies. They have the ability to retaliate with their own tariffs on U.S. exports, as seen during Trump’s first term, when he imposed tariffs on steel and aluminum imports. In response, U.S. trading partners introduced tariffs on American products such as motorcycles, soybeans, and other goods, ultimately causing the U.S. to lose the trade war.

If the U.S. attempts protectionist policies again in 2025, it will likely fail once more, as evidenced by the recent postponement of tariff implementation following initial pushback from trade partners. Countries like China, in particular, have greater flexibility in maneuvering the global trade landscape, giving them a stronger advantage in international commerce.

The Unsuitability of Protectionism for the Current U.S. Economy

The U.S. economy is currently struggling with a national debt exceeding $36 trillion, a growing budget deficit, and declining economic growth. This is further compounded by collapsing stock values in tech companies and cryptocurrencies. Additionally, the BRICS alliance has started using national currencies in trade transactions, bypassing the U.S. dollar as a medium of exchange.

Some BRICS nations have even adopted China’s SWIFT alternative, which operates using digital yuan for cross-border settlements. As a result, 52% to 90% of transactions between BRICS nations are now conducted in non-dollar currencies. This trend signals a declining global reliance on the U.S. dollar, leading to increased money supply and inflation in the U.S., which will ultimately harm American consumers.

The Best Path Forward for the U.S. Economy

Rather than embracing protectionism, the U.S. should focus on increasing production and productivity in key sectors such as agriculture and industry. Additionally, America could export advanced technology to Africa, Asia, the Middle East, and South America, if it can successfully compete with trade rivals in these regions. By doing so, the U.S. could benefit from technology sales and international partnerships, strengthening its global economic position.

Protectionism, on the other hand, is a losing bet. It will only worsen U.S. economic problems, likely leading to stagflation, which will have ripple effects across the global economy.