Liberation Day or Lockdown Day?
The Trump administration calls this ‘Liberation Day’—a triumph for US workers and a levelling of the global trade playing field—with sweeping new tariffs on imports from the UK and EU. But the policy is more likely to shackle the US and European economies, rather than liberate them.
The argument, of course is that tariffs will protect US industries by making foreign goods, such as cars, more expensive, thus boosting demand for US-made alternatives. But recent history shows the folly of it. When the first Trump administration imposed steel tariffs in 2018, jobs in the US steel industry were certainly saved—but at huge cost (some studies say $800k per job). That is because the US economy in general suffered as manufacturers (including carmakers) who needed steel had to pay more for it or could not get the type and quality of steel they needed from US producers. The result was higher prices, stretched budgets and lay-offs elsewhere.
The effects are likely to be even broader this time. The UK and EU are large trading partners for the US. The EU buys about a fifth of US export goods, and the UK is an important market for US tech and services. And putting tariffs on European exports simply invites retaliation. Already, the EU says it will respond ‘robustly’, and the UK —which sadly missed its post-Brexit opportunity to negotiate a free trade deal with the US and is now seeking a closer relationship with the EU—could be pushed into following suit. That would hurt the US as much as Europe, costing US exporters billions across industries from agriculture to aerospace.
And there is a wider political aspect too: Europeans thinking that they cannot trust the United States, nor rely on its unflinching goodwill. That might be part of Trump’s plan—getting Europe to be more self-reliant on defence, for instance—but if so, it comes at huge political and economic cost.
How often do we need to say it? Tariffs are not a tax on foreigners. They are a tax on domestic manufacturers and consumers. Even if US importers absorb some of the tariff cost, their profit margins will suffer, jobs will be cut, and trade will go elsewhere. Supply chains too will be disrupted. US carmakers like Ford and GM are reliant on European-sourced parts that they will not be able to source quickly or cheaply. Americans will notice it in the ‘sticker price’ of the cars (and much else) that they buy. And with Trump calling tariffs ‘reciprocal’, there seems no limit to their potential scope. French wine (Americans drink a lot, particularly the good stuff) will get more expensive in the US; so will other goods that Americans take for granted.
The Trump administration sees tariffs as a matter of fairness, citing high EU tariffs on cars and the UK’s imposition of VAT on technology. But both those countries buy more from the US then it buys from them. (How ‘reciprocal’ is that?) Remember too that the UK is a key US ally, not just on trade, but in terms of its wider world view. Its prosperity and economic stability matters to Americans. Disrupting that relationship for short-term economic—or even political—leverage comes at much greater long term economic and political cost. And meanwhile, China—which uses trade as a foreign policy weapon—looks on gleefully as the US proceeds to lose its friends in the other liberal democracies.
After the Second World War, politicians and economists came to the conclusion that trade restrictions were a major source of conflict and must be reduced. Institutions such as GATT and the WTO helped reduce global tariffs significantly—even if too many unseen restrictions remained in place. This major reversal is therefore disappointing. Trump’s tariffs might raise a few cheers from a few factory workers, but not from roughly 99.9% of economists. And the cheers will fade when prices rise, jobs go and allies find other markets and other friends. Liberation? Isolation, more like.
Eamonn Butler is author of An Introduction to Trade and Globalisation (IEA, 2021) and ‘The Psychology of Protectionism’, in M Rangely & D Hannan (Springer, 2025), Free Trade in the Twenty-First Century.