Economist Reassesses Trump’s Trade Strategy

There’s been a notable shift in the perspective of a prominent Wall Street economist regarding President Donald Trump’s trade policies. Torsten Sløk, the chief economist at Apollo Global Management, had previously been critical of the president’s approach to tariffs. However, he now suggests that Trump might have outsmarted many with his strategies.

In Sløk’s recent analysis, he pointed out that while uncertainties around trade policies could impact the economy, Trump has the ability to lower tariffs on key trading partners. At the same time, the remaining tariffs could be utilized to boost federal revenue.

This change in tone is quite striking compared to his earlier warnings. Back in April, Sløk had cautioned that Trump’s tariff decisions could lead the economy into a recession, especially with potential disruptions in goods coming from China likely affecting American small businesses.

More recently, however, Sløk has suggested a possible strategy involving a 30% tariff on Chinese imports, along with a 10% tariff on other countries. These nations would be allowed a year to address non-tariff barriers and liberalize trade.

“Giving one more year will allow US companies to adjust to a new landscape with permanent tariffs,” Sløk mentioned. “This should help minimize uncertainty for businesses, employment, and financial markets.”

He added that such measures could stabilize a market that’s been fluctuating wildly and potentially enhance the government’s revenue significantly. Sløk estimates this might lead to about $400 billion a year in tariff income, which could help lower the fiscal deficit without needing new domestic taxes.

“It feels like a win for the world, providing $400 billion in annual revenue for taxpayers,” Sløk stated. “With just a 10% tariff, trade partners might be content, and US revenues would increase. It’s intriguing to think the administration might be undervaluing this.”

This week, Trump announced a new trade agreement with China, calling it a “complete transaction,” yet the specifics of this deal remain undisclosed. Meanwhile, the GOP is approaching a significant deadline in July, as the 90-day suspension on tariffs affecting several major global partners is set to expire.

Discussions are ongoing with 18 countries, including the EU, Japan, India, Vietnam, and Malaysia. Although there’s been some headway, such as a framework deal with the UK and preliminary agreements with Vietnam and India, many talks are still far from completion.

If these negotiations don’t pan out, the US may reintroduce or ramp up tariffs. Still, analysts are doubtful that substantial agreements can be struck in such a short time, noting that comprehensive trade deals often take years to finalize.

In light of this uncertainty, the administration might extend talks, potentially pushing discussions into early September to stabilize international trade relations and mitigate further economic distress.