Trump’s Philosophy for Tariffs – The Underlying Issues that the World is Ignoring
Oct. 12, 2025 • Krish Singh
The MAGA(Make America Great Again) Saga is unfolding with surprises left, right, and center. And one of the surprises is the tariff strategy of the Trump administration. The global financial markets are drenched in red, as the trade war escalates. But why is the President of the most powerful nation going ten toes over it when, for so many years, no one even bothered? Well, better sooner than later. The Market crashes were expected. The trade war isn’t new. It started back in 2017 with the advent of the Trump administration for his first term, and is just beginning to take better form now. Let’s look at what Trump’s philosophy is behind this, why what’s happening should happen and should’ve happened much earlier, and some underlying issues that may be being asked to take the backseat but probably deserve more attention.
Aim of Trump with the Tariffs – Why it makes sense
Being in a deficit isn’t desirable. And that is the situation America is in right now, which needs to be stopped. For years, this US trade deficit with China has been rising and has now piled up close to 300 billion dollars. Which means that the US has given close to 300 billion dollars worth of more business to China alone than China has given to the US. Now, it is an essential economic rationale to have a level playing field for trade, and in matters of two of the world’s biggest economies, it definitely should be addressed. The bigger issue is not only that this creates an unfair trade culture, but it also alarms a debt crisis. If the US keeps on piling debt at the rate at which they currently are, sure, the countries are doing business, but it can soon lead to unintentional dependency if not already. This behaviour would cause the two economies to get accustomed to the business, making them dependent on each other, because the US requires goods from China but also needs to control its debt, and China would want to keep selling to the US because they don’t want to lose business.
Trump has emphasized the word ‘tariffs’ since before the 2024 US elections. The question is, why is that the solution? Or is it even a solution at all? One of the most famous economists of all time, Adam Smith, has said that there should be no tariffs and taxes among countries, and free trade should occur. However, he said there are two exceptions to that. First, in matters of national defence, and second, to retaliate against actions of a nation. And that is a part of Trump’s objective. The US has piled a massive amount of debt, specifically with China, amounting to close to $300 billion, and if it keeps on going this way, the US may start losing its control very rapidly. It not only burdens the nation to repay the debt, but it also increases the country’s dependency on foreign goods, affecting industries like manufacturing. Since his first term, Trump has highlighted the trade deficit as a symbol of unfair trade. Trump has aimed to reestablish fair trade between the two countries and bring back manufacturing to America. The trade deficit’s scale is a concern, and levying higher tariffs on imports will help in addressing the debt problem.
Underlying Issues that need more attention
Another crucial point here is the value of the dollar. USD has been the global reserve currency for many decades now, since the Bretton Woods system came into force. In the Bretton Woods meeting, the USD was pegged to Gold, which was the main reason for the rise in its value. And alongside, all the member countries pegged their currencies to the USD, making it the global reserve currency. This gave the US innumerable advantages at the global level. Later in 1970, President Nixon held that the USD would no longer be pegged to Gold due to the increasing demand. This marked the end of the Bretton Woods order and the beginning of the Neo Liberal order. However, USD continued to be valuable as it was so widely held by all the member countries around the world and had the same value. Now, back when the Bretton Woods Conference was held, the US was a manufacturing powerhouse, but it has fallen drastically and is nowhere near as before. Trump’s team aims to reindustrialize the US, bringing manufacturing back to the state, while simultaneously keeping the USD as the reserve currency.
The US tariffs are also retaliatory, rising out of alleged unfair trade practices China undergoes. China imposes restrictions on the US to access its markets, while enjoying access to the US consumers. China has also historically kept the value of its currency (the Yuan) low to reduce import costs for other countries. How? Due to the cheap labour and manufacturing costs in China, they can produce goods at a much cheaper rate while keeping their profits. The low-Yuan value helps in making import costs for countries like the US cheaper as the value of the Yuan is much less compared to that of the Dollar. So China gets an advantage from lower production costs, which enables low Yuan prices, which in turn reduces import costs for countries like the US by directly reducing the prices in Dollars, while also keeping their margins. But this isn’t a trade strategy; it is manipulation. China, while explicitly using these tactics, creates an unfair environment for global trade.
Another major problem is the breakdown of the economic order. It is obviously incongruous to have both large trade and capital imbalances in a deglobalizing world in which the major players can’t trust that the other major players won’t cut them off from the items they need (which is an American worry) or pay them the money they are owed (which is a Chinese worry). This is a result of these parties being in a type of war in which self-sufficiency is of paramount importance.
Tariffs are Trump’s way of keeping his “America First” proposition alive and his ambition to make the US the leading manufacturer of the world again by increasing negotiation leverage. The tariffs put pressure on China and the other nations to get to the table and come up with a mutual decision.