Economic Decline Awaits Americans as Trump Imposes Tariffs

Economists are quite unanimous in their view that tariffs hinder economic growth and overall welfare. They also agree that free trade and the removal of trade barriers boost economic growth.

These views stem from the fact that free trade lowers the prices of goods and services for both producers and consumers. Moreover, tariffs partly translate into higher prices, which negatively affect importers, exporters, and consumers alike.

This holds true even when tariffs are intended to protect a specific industry, as they inevitably increase production input costs and trigger retaliatory tariffs. Import tariffs can also harm domestic exporters by disrupting supply chains and raising their input costs.

In the long run, an even more harmful effect of tariffs is that they reduce competition between companies. As a result, businesses operating in tariff-protected markets become inefficient and less innovative, ultimately leading to difficulties—especially if the tariff barriers are later removed.

All of this seems to be entirely unknown to U.S. President Donald Trump, who is set to announce import tariffs on "all" trade partners today. This is despite the fact that the tariffs he imposed during his first term had a negative impact on American employment, as noted by Jyrki Ali-Yrkkö, Director of the Research Institute of the Finnish Economy.

Unfortunately, potential U.S. tariffs would have equally negative effects on America's trade partners. As a result, it won’t be just Americans who "enjoy" economic decline, but almost all nations across the world.

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Russia’s Economy Set to Slow, Says Bank of Finland

The Bank of Finland has predicted that Russia's economic growth will slow from last year's four percent to about two percent this year and then further decline to around one percent.

However, Russia's economy is not currently undergoing a crisis, but there are extremely high risks associated with its development as long as the country continues its war of aggression against Ukraine.

Russia's economic growth has been based on pumping money into the market—that is, increasing government spending and expanding military-industrial production. However, this approach is reaching its limits, as labor shortages are emerging, prices are rising rapidly, and sanctions are hampering Russia's foreign trade. Additionally, the country's production capacity is nearing full utilization, making further expansion difficult.

Russia's public finances are also in deficit, and inflation has accelerated to the point where consumer prices had already risen by ten percent at the beginning of this year compared to the previous year. However, it remains to be seen how the Russian people—who have historically been accustomed to hardship—will react to this.

From the perspective of world peace, it would of course be beneficial if they became frustrated with their government and ultimately brought it down. However, Vladimir Putin is a dictator who does not shy away from violence, making this scenario unfortunately unlikely.

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Russian army not comparable to western military services

Russians have lost half of its generals, who have participated in the war in Ukraine. The New Your Times reported that this was enabled by a help of the US intelligence service.

Americans also helped Ukrainians to destroy the flagship of Russia’s Black Sea Fleet, cruiser Moskva, some time ago. Undoubtedly such a help has been highly valuable to Ukrainian efforts to stop its aggressive neighbor in the war. 

The news referred above must have hit hard president Putin´s thoughts. Before the war in Ukraine he most probably imagined his conventional army to match with the western military forces. But now even Ukrainians - with a help of American intelligence service - are able to stop it and even kill its highest officers. 

It has turned out, that even if the Russian army played a major role 80 years ago in stopping Hitler´s army, its strength has vanished since the fall of the Soviet Union - or perhaps even earlier. And right now rebuilding its capability will be unrealistic for decades due to the economic and technological disconnection from the western markets due to Putin´s own stupidity in attacking to Ukraine. 

Even worse for Putin: these facts are undoubtedly understood also by other Russians in high positions. Therefore it is only a matter of time, before Putin will follow the last Czar and be set aside from his position as the president of Russia. 

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