Trump's measures to increase tariffs.

The first step, in my opinion, can be summarized in three axes.

* Negotiating file

* Encouraging investment and attracting funds.

* Addressing structural imbalances in the American balance of payments or trade balance.

Initially, many economic analysts believe that this step is intended to pressure certain countries to pass political and commercial understanding files and use tariffs as a negotiating file. For example, the file of the American-European dispute in NATO, which relies on massive American funding compared to minimal European contributions relative to American funding. Also, the trade conflict with China and the attempt to curb its expansions through bilateral agreements, as Trump considers China the number one economic enemy.

As for the next axis, attracting foreign and American investments into the United States, based on the increase in the cost of foreign investment for those targeting the American market, and customs are known to be one of the basic cost items and an important axis for measuring investment returns. This step aims to draw funds from American and foreign companies invested outside America to pump investments into the American economy due to increased costs on the American consumer, which makes them move away from incoming products due to rising prices and shift their preferences to high-quality domestic products with lower prices, in addition to creating new job opportunities if successful in attracting investments into America.

As for the American trade balance deficit and the necessity of structural reforms on it, it is known that reforms are carried out in one of two ways or both methods together: either enhancing exports and reducing imports or reducing imports with high tariffs to reduce the trade balance from the side of imports, provided that the export side is maintained at its maximum level until balance is achieved.

Looking at the trade balance in its latest statistics in January 2025, you find that there is a deficit estimated at 131.48 billion dollars, with total exports amounting to 269 billion against 401 billion in favor of imports, reflecting a deficit ratio of 32%. This makes intervention a pressing need to restore balance in favor of the American economy, so you find that imposing tariffs is one of the tools to reduce imports, which shifts the balance towards exports, in addition to what was mentioned in the previous point, which is attracting foreign and American investments outside the borders to benefit from reduced cost percentages targeting the American consumer because domestically manufactured goods will naturally not have tariffs, and you may find many internal exemptions, reducing their cost to the American consumer and increasing the amount of money pumped into the economy and creating new jobs and reducing unemployment rates.

If we find that Trump's new policy may lead to a significant recovery of the American economy despite the criticisms directed at it, claiming that it may weaken the economy and result in a backlash if those countries reciprocate with additional tariffs on their domestic products to those countries, but this depends on two very important variables.

The importance of American products in those countries and their inability to dispense with them, which necessitates not raising tariffs on them so that the local consumer is not affected. An example of this is goods and services in the field of communications and technology and the internet and all its accessories, where American products from companies like military manufacturing, modern technology, and artificial intelligence such as Apple, the internet, networks, and their accessories, among others, have a high reputation and quality and widespread servers, making it difficult to dispense with them.

The second reason is its need for American markets, such as China, which drives it to conclude agreements and understandings, as we pointed out in the first point. In this case, the gains on the negotiating table usually favor the American economy.

Therefore, I believe that in the short term, these measures may affect creating instability in the stock market and the capabilities of companies to absorb the shock, considering that tariffs were imposed after the end of the first quarter of the year, and it is known that these companies estimate their costs and profit margins with pre-planned strategies. However, the pre-calculated risk factor will restore balance to the market and absorb the shock quickly, and what we see is merely a temporary news effect on stocks and indices, and the market will quickly recover. A country as large as America, with its advisors and economists, cannot take such a step without adequate study of its impact and results.

Mujahed Ali