Trump’s Tariff Strategy Mirrors Brexit: Ready to Endure Setbacks for the Sake of Principle

We’ve watched this movie before; it’s titled Brexit.It’s not entirely the Hollywood interpretation, as US President Donald Trump has a distaste for Hollywood.

Nonetheless, it’s grander, noisier, filled with more explosions, and adorned with more gold leaf than the damp, tweedy little-England original screenplay.

The core lesson remains unchanged: be cautious about what you vote for.

Everyone else warned that it was a misguided decision that would shrink the economy and the government revenues reliant on it.

Now, the British economy is indeed smaller than it would have been had it remained part of the EU, and the British government finds itself trapped in a cycle of budget cuts and tax hikes to fulfill commitments that were manageable within the EU growth trajectory, but are now just out of reach post-Brexit.

The Labour government is now contending with the political backlash generated by the prior Conservative administrations, and the specific type of Brexit they were constrained into by various forms of UKIP.

A left-leaning government forced to impose welfare cuts is immediately disappointing to the constituents who voted it into power.

However, drastically altering economic arrangements is not easily achieved once a path has been established.

Now, a much larger and significantly more impactful economy is undergoing a substantial restructuring of its economic framework.

And yet again, this is being executed based on a democratic mandate.

President Trump informed the American public about his agenda and the rationale behind it—and the populace voted accordingly.

Tariffs have consistently been a component of the second Trump administration’s strategy—erect a trade barrier and compel foreign parties to bear the costs.

The US stock markets plunged 5% each day on Thursday and Friday.

Voters, particularly those within the seven swing states, had a choice, and they opted for tariffs.

It shouldn’t come as a shock if future retaliation from some of those foreign nations is specifically aimed at products produced in those seven states.

And if this escalates into a protracted trade war, keep an eye on Republican senators campaigning in any marginal seats amongst the third of Senate positions up for election next year—export-focused sectors in states with any slightly vulnerable Republican senator are now potential targets for retaliatory tariff actions.

These senators may become susceptible, despite the 2026 list of contested seats indicating no changes in the current Republican dominance of the Senate.

This vulnerability won’t stem from counter-tariffs, but rather from the negative repercussions expected to arise from the tariffs implemented by Trump, which were announced in the White House Rose Garden last Wednesday evening.

Particularly concerning are the inflation and unemployment that most economists predict will result from the tariff decision.

Prices are set to rise because the government will impose taxes on them, and when prices increase, employment often gets cut to align the financials.

As a consequence of the Executive Order signed on Wednesday, the world’s largest economy increased the average tax rate on imported goods from 2.5% to 22%. That’s a significant shift.

Not only will Americans witness rising prices, but they are already noticing a decline in the value of their pension savings.

The US stock markets dropped 5% each day on Thursday and Friday.

Over the past fifty years, there have only been three previous instances where two consecutive days saw 5% market declines: 1987 (stock market crash), 2001 (9/11), and 2008 (financial crisis).

This illustrates the magnitude of the shock-induced changes we’re discussing.

JP Morgan has elevated its estimation of a US recession this year to 60%, up from a mere 15% risk at the beginning of the year, which is consistent with any ordinary year.

The figures almost defy belief, sounding too extraordinary for most to grasp: $5 trillion in market value erased (remember, Elon Musk is attempting to reduce US government spending by $1 trillion).

Apple’s stock plummeted by approximately $300 billion in a single day, as investors recalibrated their expectations for what lies ahead.

By Friday evening, they were openly expressing their fears of an impending recession.

JP Morgan has raised its assessment of a US recession this year to 60%, up from just 15% risk at the year’s start, which is typical for any standard year.

The currency has also depreciated, undermining arguments from pro-tariff advisers like Peter Navarro, who claimed the dollar would strengthen, mitigating the impact of rising consumer prices (the expectation was that foreign entities would absorb most of the price hikes, leaving consumers responsible for only a small portion of the “adjustment”).

However, US investors are not convinced by this rationale—the consumer-dependent stocks have suffered hard in the sell-off, particularly those reliant on imported products.

This primarily affects those businesses that depend on China, often referred to as the world’s factory.

This includes the major supermarket chain Walmart, consumer electronics retailer Best Buy, and Apple, which predominantly manufactures its premium (and high-margin) devices in Asia, especially China.

It’s already facing challenges persuading customers to shell out a significant sum for the latest iPhone 16; now, imagine the difficulty of convincing them with a 54% tariff on goods produced in China.

All of this diminishes the willingness of corporate boards to invest, and since investment is crucial for economic vitality, any disruption in the investment flow spells trouble.

If you believe the Trump tariffs are here to stay, you will either invest in US production capabilities or start seeking growth opportunities elsewhere to offset lost sales in your established markets.

On the other hand, if you think President Trump might alter his stance (which he has been known to do), you might hesitate to invest in US operations while waiting to gauge the forthcoming direction.

However, a shift in direction may take time. In the interim, you might be forgoing investments in the US economy.

We’ve already witnessed a similar scenario play out with Brexit, where a lack of market access and uncertainty surrounding the permanence of the post-Brexit framework prompted companies to defer their investment decisions.

The European Commission is viewed as one of the influential players in global trade negotiations.

An underwhelming economy is the consequence.

There are ample warnings that the US could also encounter economic challenges if this new tariff structure becomes entrenched.

While the damage may not be catastrophic, it could exert a dragging effect on the economy, resulting in underperformance due to diminished investment, consumption, growth, and employment.

With Brexit, the external response was a collaborative effort from the remaining 27 EU member states, managed by their collectively controlled bureaucracy, the European Commission—one of the powerhouses in trade negotiations worldwide.

In this American adaptation, another global powerhouse in trade negotiations is standing against the rest of the world.

Consequently, this narrative will unfold differently. Some nations are at such a disadvantage with the US that they will concede nearly anything to retain open access to the US market (along with the precious hard currency it brings).

Others, notably the EU and China, are equipped to engage in a fierce battle that may inflict damage on all parties involved.

Unlike Britain, the US indeed holds a significant advantage in the global trading landscape.

Most critically, it possesses the dollar, the primary currency for global trade.

Additionally, it remains the leading provider of digital services and is the epicenter for Artificial Intelligence (AI), an immensely disruptive technology of our era.

Unlike Britain, the US cannot be sidelined and largely ignored; it is far too substantial and powerful for that.

It’s not as if the EU and China could unite against America: they are not natural allies; the European Commission views China as a systemic rival and economic competitor.

As they say, we are closer to Boston than we are to Beijing.

A negotiated agreement is the best and only path forward. But what does Trump genuinely desire?

Is it to narrow the trade deficit? Absolutely, there’s room for collaboration there.

We made an attempt back in 2013 when discussions for the Trans-Atlantic Trade and Investment Partnership (TTIP) kicked off in Dublin Castle.

The goal was to minimize non-tariff barriers in EU-US trade because tariff barriers were deemed minimal on most goods, making a formal free trade deal seem unnecessary.

Thus, contentious topics like hormone-treated beef and chlorinated chicken were up for discussion—along with technical resolutions to accommodate both parties and enhance market access.

Ultimately, the discussions reached a standstill, with evolving sentiments on both sides of the Atlantic turning against anything resembling “globalization.”

However, it is presumed that the technical work on non-tariff barriers hasn’t been disregarded, but may be revisited as potential solutions to facilitate trade between the EU and the US.

Additionally, increasing purchases of US energy products would also be beneficial.

It’s conceivable that there may come a moment when a success can be proclaimed, and normalcy is restored.

This is the “rational shake-down” interpretation of the tariffs.

However, what if he is genuinely committed to revitalizing US manufacturing (and the communities that once relied on it), and sees tariffs as a protective instrument to achieve that longer-term, more challenging objective?

This would represent an ideological ambition rather than simply addressing a trade gap and refining existing trade agreements.

As critics continue to denounce the unconventional and some even label it as dubious data used to establish each country’s new tariff rate by the US government, the implications of the initial phase of the new regime start to have tangible effects on the shipments of goods arriving at US ports from today.

The US-stated objective is also to reshape the global trading framework, which is centrally coordinated by the US.

Previous efforts to alter the world trade architecture have proven challenging and prolonged, involving comprehensive multilateral negotiations that took years to reach consensus.

If you want rapid action, perhaps launching a significant disruption, like Trump has done, serves as the quickest method to propel progress.

An immediate test case arises with the impending visit of Israeli Prime Minister Benjamin Netanyahu to Washington, where he aims to contest the 17% tariff imposed on one of its closest allies.

What complicates this new US tariff framework for foreign entities is that it stems from an ideological perspective, supported by a loud and relentless propaganda machine.

It does not present itself as a rational position, one that can be negotiated toward a “reasonable” resolution.

In this sense, it resembles Brexit, willing to incur self-inflicted harm to prove a point.

This makes negotiations difficult, as there is no visible bottom line that is attainable.