Best of 2025 - Trump’s risky American economy |
Trump’s tariffs, migration and fiscal policies are endangering the American economy, and risk destroying American claims to global leadership.
A repost from 29 October 2025
Following World War II, US leadership gave the world the global rules-based order. All economies benefited, and living standards rose as never before everywhere.
But today Trump is challenging that rules-based order. Trump and his MAGA movement blame foreigners for the decline in the real wage of a typical US white male so that it is now less than it was 40 years ago. As Trump and his supporters see it, it is only by restoring American hegemony that the living standards of working-class Americans can recover.
Instead, the real reason for the decline in working-class wages in America was first technological change, principally new automation and communications technology, that hollowed out middle-level jobs. Second, there was a failure to reskill affected workers.
But apart from this past failure by previous administrations to understand the importance of skills training, what Trump and his supporters don’t understand today is how much the US has relied on other countries for its economic success, and therefore the grave risks that Trump’s policies present to the American economy itself.
In short, Trump’s dangerous policies include his tariffs, migration policies and fiscal policies. As will be shown, these policies are having a negative impact on American inflation, financial stability and productivity.
The outlook for inflation in the US
Although Trump has frequently varied his tariff announcements, the OECD in the September update of its Economic Outlook concluded that “The overall effective US tariff rate rose to an estimated 19.5% at the end of August, the highest rate since 1933."
In addition, the value of the US dollar against other currencies dropped by 11% in the first half of this year, the biggest decline in more than 50 years. And, as will be argued in more detail below, the dollar is at risk of depreciating further, with Morgan Stanley Research estimating that the US currency could lose another 10% by the end of 2026.
Both the higher tariffs and the lower dollar will increase inflation in the US.
Although the effects are only starting to come through, already the prices of imported items such as clothes, electronics and household appliances have surged. The market expects that consumer price........