The announced tariffs on imported goods could be the beginning of a new era in the global economy. Harsh protectionist policies aimed at protecting the domestic market could lead to significant economic losses for both American businesses and international partners in the short term
Artem Shcherbyna, Chief Investment Officer at Capital Times, wrote about this in a brief commentary to Finance.ua.
The implementation of tariffs even at a level 50% lower than the announced ones could complete the globalization phase, opening a period of “fragmented economic relations.” This term describes the tendency to divide the world economy into regional blocs with limited trade ties.
The history of the United States already knows periods of tough customs policy, such as the 1860s and 1870s and the 1920s and 1930s. In the first case, inflation reached historic highs: in 1864, the inflation rate was about 27%. This was partly caused by the civil war, which created significant economic pressure. In the second period, on the contrary, deflation was observed: in 1932, the deflation rate reached -10.3%, which was a consequence of the Great Depression.
Given the current geopolitical confrontations, the electrification of society in the US and Europe, and the rise of radical politicians, we are likely to see increased global economic instability and a new wave of rising inflation starting in 2026. Disruption of logistics and shortages of goods will increase pressure on prices. Until then, we may see a reaction from financial regulators similar to 2020: lower interest rates and stimulation of the national economy. Money printing is likely to be limited or available through indirect mechanisms, such as financial incentives
