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With promises of sky-high tariffs and permanent tax cuts, Donald Trump returns to power in the United States with an economic plan that breaks with market traditions and places the country at the center of a new era of economic nationalism.
The rhetoric of the “minimal state,” which for decades was one of the pillars of American liberalism, seems to have been left aside with the return of Donald Trump to the presidency of the United States. The new US president's controversial proposals for the economy They bring a nationalist approach that breaks with the free market ideology and adopts interventionist measures, such as increasing import tariffs, incentives for national production and promises of subsidies for American industries.
Tariff: a barrier to global trade?
Among Trump's most controversial proposals is the creation of a generalized tariff on imported products, which could vary between 10% and 20% for regular trading partners and up to 60% for Chinese products. Trump also had the possibility of implementing tariffs above 100% in specific cases. The goal? To protect domestic production, reduce dependence on imports and encourage American companies to produce locally.
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However, experts warn of the risks. This type of measure could trigger a trade war and increase inflation in the US, since raising tariffs would make imported products more expensive for American consumers. “This policy of increasing import tariffs is not liberal. It goes against the free market and has a direct inflationary effect,” explains José Francisco de Lima Gonçalves, chief economist at Banco Fator. “If consumers do not have domestic production alternatives to what was previously imported, prices will rise, and this will have a direct impact on the economy.”
Subsidies and tax exemptions: economic populism?
In addition to the tariffs, Trump plans to make permanent tax cuts introduced during his first term, which were set to expire in 2025. This tax relief measure, along with new subsidies and exemptions for American sectors, was a promise that pleased voters, but raised concerns among economists. “The United States is not used to this type of long-term tax benefit. Here, it is common for a temporary tax cut to become permanent, as we saw with the payroll tax relief in Brazil, which was created as a temporary measure and is still in effect more than a decade later,” says Livio Ribeiro, from FGV.
Trump also promises tax breaks for sectors such as service industries, especially for workers’ tips, which would have limited effect on the middle class and could distort the labor market. “Tax breaks on tips may seem like a fair measure, but in practice it will only benefit a fraction of the workforce and create a gap in income policies,” adds Steven Kamin, a senior fellow at the American Enterprise Institute.
Expulsion of immigrants and the impact on the labor market
Another controversial point on Trump’s economic agenda is his promise to deport millions of undocumented immigrants. Today, many sectors of the American economy, such as construction and services, rely heavily on immigrant labor. Removing this workforce could create a shortage of workers in crucial areas and increase costs, resulting in higher prices.
Mass deportations would therefore have a direct impact on the economy. “If we remove millions of workers, especially in the service and construction sectors, the market will have difficulty finding replacements. This generates inflation by increasing the operating costs of companies, which will eventually be passed on to the end consumer,” says Kamin. The situation could also worsen the labor shortage in some regions of the US, making the scenario even more complicated.
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Economic nationalism and the break with liberalism
The new US president's controversial proposals for the economy marked a departure from the liberal agenda that has traditionally guided U.S. economic policies in recent decades. Instead of seeking to open markets and promote global competition, Trump advocates a more nationalist and protectionist path, focusing on strengthening domestic industries and the labor market. Armando Castelar, an economist at FGV, classifies this approach as “a modern reinterpretation of mercantilism.” He explains that by adopting an agenda focused on tariffs and subsidies, Trump seeks to reindustrialize the country and prioritize American workers, even if this means raising prices for consumers.
“Trump’s policies do not fit into classical liberalism, nor into Keynesianism or other standard economic theories. It is a hybrid model, with elements of protectionism and interventionism, and is very far from what is expected of a liberal economy,” says Castelar.
The impact of Trump's policies on the global economy
Trump’s return to the US presidency represents a turning point not only for the country, but also for the global economy. The proposal to increase import tariffs and stimulate domestic production could trigger a chain reaction, leading other nations to adopt protectionist measures to protect their economies. “The scenario that Trump wants for the coming years could reduce global trade and affect economies that depend on exports to the United States,” says Francis Fukuyama, in an article for the Financial Times. Fukuyama also warns that the nationalist movement could cause a fragmentation of international trade and increase the cost of living in countries that depend on products imported from the US.
A break with American liberalism?
Trump’s proposals have highlighted a shift in the political and economic landscape of the United States. For decades, the country has been the standard bearer of economic liberalism and globalization. However, Trump’s speech suggests that liberalism, at least as we knew it, is being reevaluated. “Trump is the symbol of a moment in which globalization and the free market are under threat. He represents a change, and not just for the United States, but for the entire world,” says Fukuyama.
These changes will have an impact all over the world, including in Brazil. American protectionism could limit access of Brazilian products to the US market, as well as alter pricing dynamics and competition in the international market.
Will Trump’s return mark the beginning of a new economic era? Where will these nationalist and interventionist policies take the US – and the world?
