Trump’s tariffs – a possible explanation and Hungary’s involvement

Article by Magdolna Sass on the Institute of World Economics’ blog

When Donald Trump was campaigning as a candidate for the US presidency, he often claimed that many countries were “taking advantage” of the US by exporting more products to it than they imported from it. Hearing this rhetoric, in my university courses I often pointed out that no one in the Trump team at the time was likely to have given much thought to global value chains. If they had, they would have known that, on a value-added basis, these trade balances are a much more balanced picture. Indeed, in some cases, such as Mexico, there is even a slight US surplus.

However, recent tariff increase announcements suggest that attention is being paid to global value chains after all. It seems that Trump’s advisers now see not only the simple trade balance, but also the outsourcing of production capacity and the offshoring of industrial capacity as the reasons behind the decline of US industry and thus the trade deficit. This industrial decline is a major cause of dissatisfaction among the US electorate, as stressed not only by the Trump team but also by experts more closely associated with the Democratic Party, such as Paul Krugman…