LONDON — International markets are in free fall, American allies are rattled and analysts warn that globalization as the world knows it may be crumbling.
President Donald Trump has since his first term been unafraid of treating America’s friends more like its adversaries. But his worldwide tariffs have the potential to reshape the global economy, and with it the lives and financial health of billions of people.
In this new, topsy-turvy world order, the United States has applied the same 10% baseline tariff to its transatlantic partner the United Kingdom as it has to the Taliban rulers of Afghanistan. The European Union, meanwhile, has a higher rate than North Korea.
E.U. foreign ministers were meeting Monday in Luxembourg to discuss their response. Though some inside the bloc, such as Italy, favor de-escalation, other influential figures want retaliation.
French President Emmanuel Macron is lobbying for a full freeze on European investment in the U.S., and European Commission President Ursula von der Leyen has already vowed retaliatory countermeasures for the "spiral" of chaos.
It’s unclear whether this is Trump’s actual trade policy or merely a hostile negotiating tactic. But after a weekend in which he doubled down rather than backing down, stock indexes tumbled early Monday in Asia, the Middle East and Europe.
“This is possibly one of the most significant moves in trade policy that we’ve seen in a long time — maybe even generation,” said Pranesh Narayanan, a research fellow at the Institute for Public Policy Research, a London think tank.
He says it’s no exaggeration to talk about the end of globalization as the world knows it. The international system of manufacturing and trade has, since the early 20th century, seen the U.S. become the world’s dominant superpower.
“There is going to be an enormous impact on the global economy. Companies will ask: ‘Can I still do business in the U.S.?’” Narayanan said. “The decisions they make off the back of that are going to reshape global trade.”
The U.S. is not only the world's largest economy — its gross domestic product is worth $27 trillion — but the dollar serves as the backbone of international trade and is used in around 90% of foreign exchange transactions. American interests have landscaped the entire topography of global trade, with the U.S. government at the forefront of shaping postwar institutions such as the International Monetary Fund and the World Bank.
Trade and markets aside, most economists agree that the upshot will be simple: higher everyday prices, including for Americans. Trump's tariffs — and the inevitable response — will mean companies will be paying more to produce and distribute goods and services. Such price hikes are frequently handed onto consumers.
“The tariffs may be effective in achieving one thing: making the U.S. less investable, eroding its soft power, and reducing financial flows into the U.S.,” Thiemo Fetzer, an economics professor at England’s University of Warwick, told NBC News in an email.
“This will lead to a devaluation of the dollar that will just increase the economic pain for U.S. consumers,” he added, given that a lower value currency makes foreign products more expensive.
Some within Trump’s camp have suggested this is all a hardball negotiating strategy.
“I wouldn’t want to be the last country that tries to negotiate a trade deal with @realDonaldTrump,” Eric Trump, one of Trump’s sons, wrote on X last week. “The first to negotiate will win — the last will absolutely lose.”
But the president has poured cold water on this, posting on Truth Social on Friday that his policies would “never change.” He told reporters aboard Air Force One late Sunday that it was necessary to “take medicine” to fix what he sees as a trade imbalance.
NBC News has contacted the White House for comment on the widespread criticisms and fallout.
Such a wide use of import taxes should be no surprise for a president who once described himself as “Tariff Man.” His first-term tariffs principally targeted China, and were upheld by his successor, Joe Biden.
This time, however, Trump has imposed a blanket 10% tariff on almost every country — including penguin-inhabited islands — while skipping Russia and North Korea. Meanwhile, the E.U. faces a 20% tariff and China of up to 54%.
Beijing was swift to retaliate with its own 34% levy, escalating a trade war the cost of which will ultimately land at the feet of consumers.
Others are less sure of how to respond.
There has been consternation and even mockery in the U.K., where Prime Minister Keir Starmer had bent over backward lavishing Trump with praise only to find himself punished like everyone else.
Some financial analysts have argued in recent days that Trump risks a return to the 1930s, when Congress passed the Smoot-Hawley Tariff Act in an attempt to boost revenue and halt the Great Depression. Despite Trump’s claim that a lack of tariffs caused the depression, economists say the 1930 act deepened the rout.
Aurélien Saussay, an assistant professor at the London School of Economics, says one must go even further into history, to 1900, to find precedent for Trump’s moves.
“The U.S. was a very different country; it was an emerging country catching up to industrialized nations like France and Germany,” he added, describing the current policies as “absurd.”
While the U.S. may have led globalization in the 1990s, the world is too interconnected for Trump to undo a complex web of global trade alone, he said.
Even without Washington's participation, Saussay said, “you would still have globalization working in a very similar fashion as it used to — just without the U.S.”