Ivan Mikloš. (source: Jozef Jakubčo)
US President Donald Trump's policies will lead to a long-term economic crisis. Economist and former finance minister Ivan Mikloš says that international trade could collapse if the US withdraws from its position that guarantees globalisation.
"A world where the laws of the jungle apply, with the right of the stronger to impose its will on the weaker, suits Trump," he explains, adding the US is the most powerful country in the world, and as such it can dictate the conditions from which it will benefit.
"It's perverse logic, but Trump clearly thinks this way. That's why he gets along with Putin. The problem is that if [the collapse] happens, the costs will be enormous for all countries in the world," Mikloš opines, adding that small and open economies, such as Slovakia's, will be most at risk.
According to him, Slovakia is ill prepared for the upcoming changes in globalisation. He points out that if the country wants to succeed, it must modernise. "Fico had more than 13 to carry out reforms, but he couldn't care less," he says in an interview with INDEX.
In the interview you will learn:
What unintended consequences will Trump's tariff policy bring,
how Trump thinks about world trade,
whether the end of trade globalisation and an economic crisis are possible,
how is Slovakia prepared for changes in the world?
US President Donald Trump announced the introduction of 25 percent tariffs on car imports. How big a problem could this be for car manufacturers in Slovakia?
A big one. Regardless of the tariffs, car manufacturers already have trouble competing with cheap Chinese cars. If they increase prices by 25 percent on the American market, they will have even greater difficulty asserting themselves.
Trump's expectations will not be fulfilled
Trump claims that the tariffs will help balance the passive trade balance of the US. Will they bring the desired effects?
Almost all economists will tell you that import tariffs are a bad move and will not bring the positive effects Trump expects. They will certainly lead to retaliatory measures from the affected countries, which has already happened and a trade war has begun. Trump apparently believes in balanced trade, but this is nonsense. The problem with tariffs is that they harm everyone, but smaller and open economies such as Slovakia even more.
When Trump increased tariffs on Chinese products during his first term, the US trade deficit with China did indeed decrease.
Yes, but the US deficit with Mexico and Canada increased. The overall US trade deficit even increased. The same thing will happen again.
Could the tariffs result in an increase in prices for Americans?
Certainly. Americans are very sensitive to inflation; after all, Trump won the election by criticising higher prices under president Joe Biden. For example, tariffs will not only make European cars more expensive, but also imported intermediate products that are used in American products, including cars. They will eventually become more expensive, too.
What other unintended consequences will tariffs have?
Tariffs will strengthen the US dollar. That means American exports are more expensive and imports are cheaper, which goes against the idea of the US trade deficit decreasing. These economic effects will neutralise Trump's political expectations.
Trump can be pragmatic. If he sees that the tariffs have brought higher inflation, he will cancel them.
If anything can pressure Trump to change, it is public opinion. It may turn against him because of inflation.
Will Trump's policy of force and threats against trading partners not lead to greater pressure on the latter to reduce reliance on the US, or to efforts to de-dollarise the world economy?
