China this week reduced the number of American films that can be shown in the country in response to U.S. tariffs. U.S. President Donald Trump dismissed the move as “mocking.” But it shows the shortsightedness of Trump’s trade war.
Points of attention
- Trump's trade wars could lead to significant losses for the US economy, including a decline in the dollar and a loss of influence on the world stage.
- Underestimating the value of the dollar as the world's reserve currency may result in serious financial problems for the United States and its consumers.
- The loss of a leading role in world trade may impact the country's military power due to a lack of defense funding.
What the US is losing from Trump's trade wars
Recently, investors have begun to massively dump the dollar (its exchange rate has fallen by about 8% since Trump's inauguration) and US Treasury bonds (the yield on 10-year notes has exceeded 4.5%), demonstrating what the world could be like if the US continues to retreat from its global leadership role, which it has played for the past 80 years, ensuring stability and prosperity.
At the same time, Trump reportedly continues to insist that the rest of the world is "robbing" the United States, despite a 90-day pause in imposing new tariffs on all countries except China. He portrays partners in Europe and Asia as parasites who have lived at America's expense for decades.
As evidence, he cites the US trade deficit, which amounted to $918 billion last year. At the same time, the US president greatly exaggerates the deficit with China, claiming that it is three times larger than the real one.
Trump has also repeatedly stated that Europe does not buy anything from the United States at all — although in fact the European Union purchased $649 billion worth of goods and services from America in 2024 alone.
However, it also states that a certain "unfairness in global trade" still exists: it is often easier for other countries to sell goods in the United States than for American companies to sell abroad.
But this is no reason to dismantle the global trading system, which, by and large, benefits the United States enormously. If America abandons its tolerance for small distortions, it will lose significant influence over that system.
In addition, it is specified that over the half-century of trade deficit, the US economy has quadrupled (adjusted for inflation). The journalists note that it is impossible to estimate in monetary terms how much the US could lose by giving up its leading position.
Trump’s advisers argue that the dollar should be weaker to boost exports and reduce the trade deficit. But the dollar’s role as the world’s reserve currency brings dividends that far outweigh the potential costs of its high value. Nearly 60% of the world’s foreign exchange reserves are held in dollars; 64% of global debt is denominated in dollars; 54% of foreign trade contracts are concluded in dollars.
This means that other countries are effectively financing U.S. debt, which lowers the cost of borrowing and debt service for the U.S. government and for American consumers. It also helps keep prices of imported goods stable and reduces the risk of a currency crisis in the United States.
Historically, if a country's economic influence decreases, its military power also weakens - due to a lack of defense finances.
Now, Trump is putting all the benefits of American leadership into question. He is dismantling America’s primacy in world trade and avoiding protecting allies. If he continues in this vein, the United States risks losing more power and influence than anyone can imagine. And the world will become less safe.
