The Guardian view on Trump’s tariff push: it should spark a global call for fairer trade | Editorial |
On January 20, 2025, Donald Trump’s rhetoric surrounding trade and economics is once again shaking the global economy. His aggressive stance on tariffs and protectionism is raising concerns worldwide. Experts warn that Trump’s policies could lead to a destabilized global economy, but there might be a way for Europe to turn this challenge into an opportunity.
Trump’s economic agenda echoes historical figures, such as Barry Goldwater from the 1960s and even the policies of William McKinley in the late 1800s. He advocates for a minimal government role, echoing ideas once popularized by free-market economist Milton Friedman. The current president’s goal is to dismantle the taxation system, aiming for a complete abolition of income taxes. This vision is in stark contrast to previous political leaders who emphasized the importance of income tax for funding government programs.
In terms of trade, Trump’s approach resembles that of Ronald Reagan in the 1980s. Reagan imposed heavy tariffs on goods from countries like Japan and Canada, and Trump’s policies seem to follow the same path. But his focus has shifted towards China, with tariffs seen as a tool to protect U.S. industries. However, Trump’s economic outlook isn’t just national—it’s global. His “America First” mantra is a worldwide call to action, where U.S. interests take precedence at the expense of others.
One of the key shifts in Trump’s policies is the profound impact U.S. tax laws now have on the global economy. Nearly half of U.S.-listed company shares are owned by foreign investors, an astonishing rise from 5% in the 1980s. This means that U.S. tax cuts, such as the corporate tax reduction from 35% to 21%, are not only benefiting U.S. investors but are also rewarding the wealthiest people worldwide. This shift in wealth distribution means that countries like France are feeling the impact, as wealthy French households now own significant stakes in U.S. companies.
The competition to slash corporate tax rates has intensified since Trump’s tax reforms, with the U.S. continuing to lower its tax burden for corporations. While the Biden administration introduced subsidies in sectors like tech and defense, the goal of creating fairer global tax systems remains out of reach. Despite the global minimum tax agreement of 2021, U.S. political forces are working to dismantle it. This race to the bottom could eventually erase all corporate taxes, deepening inequality globally.
Meanwhile, Trump’s focus on oil extraction is compounding these issues. The U.S. has become the top global oil producer, thanks in part to the fracking boom. However, this increased drilling is not only damaging the climate but is also contributing to global environmental instability. The negative impact of such practices is felt most acutely by the poorest nations, which bear the brunt of climate change.
These dangerous trends—lower taxes for the wealthy and corporations, as well as relentless environmental exploitation—could ultimately trigger severe backlash. The danger is that Trump’s policies could spark a global crisis, with far-reaching consequences. While the U.S. is not the first nation to adopt such aggressive economic practices, the situation today is different. Tax competition is already at rock-bottom levels, and inequality is at an all-time high. The world is also facing a critical moment for climate action, and these policies risk undoing progress made in global environmental protection.
As the world teeters on the edge of what could be an economic and climate catastrophe, the need for a new approach to international relations has never been more urgent. Europe, in particular, must step up and propose a radical shift in how we approach taxation and climate policies. One promising solution could be to impose laws that reach beyond national borders. This would involve taxing under-taxed corporations and their billionaire owners wherever they may be located, ensuring they pay their fair share in the countries where they operate.
By pursuing such bold policies, Europe could offer a new economic vision—one that addresses the deep inequalities and environmental challenges we face today. It is time to rethink global trade and protectionism, not as a race to the bottom but as an opportunity to create a more just, sustainable world economy. With Trump’s trade war threatening to escalate, Europe has the chance to lead by example and reshape the global economic order.
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