Trump may have outsmarted the world with his tariff strategy

In early July 2019, Torsten Sløk, chief economist at Apollo Global Management, published a blog post discussing President Donald Trump's tariff strategy. This post touched upon the possible implications of the tariffs imposed by Trump, suggesting that by maintaining lower levels of tariffs while encouraging other countries to reduce their non-tariff barriers, both the U.S. and its trade partners could benefit economically. His theory proposed that if Trump kept tariffs stable at 30% on China and 10% on other countries, it could ease uncertainty that was impacting global markets and potentially raise significant revenue for the U.S. government. The blog post came shortly before a 90-day pause on Trump's reciprocal tariffs was set to end. This pause aimed to provide countries time to negotiate new trade deals, but progress had appeared limited publicly. While Sløk had been critical of Trump's tariff measures, his recent analysis suggested a strategy that could lead to stability in the long run. By extending negotiation periods and creating a more predictable tariff environment, it could offer businesses the necessary time to adjust to a new economic reality without immediate drastic impacts. Moreover, Sløk pointed out that such an approach could result in a significant increase in annual revenue for U.S. taxpayers while offering trade partners a seemingly favorable deal with reduced tariffs. He believed that maintaining some level of tariffs while promoting economic discussion and adjustment would reflect a strategic positioning by the Trump administration. However, it remained to be seen whether Trump would embrace this approach or continue on his existing course. As the tensions surrounding the trade negotiations continued, Sløk forecasted potential ramifications stricter tariffs could have on smaller American businesses, making it imperative for the Federal Reserve to assess the inflation landscape amidst this ongoing uncertainty. The back-and-forth between the U.S. and other nations was indicative of a larger global economic conversation rooted in trade relations and policy adjustments.