To begin with, Trump secured passage of “One Big, Beautiful Bill” despite a minimal majority in the House of Representatives and compelling projections that this tax and spending package would increase the federal deficit by more than $3 trillion over the next ten years (unless an economic boom due to artificial intelligence magically happens). Meanwhile, the U.S. southern border is more tightly controlled today than it was for many decades before.
With the duties, Trump especially managed to get what he wanted. Europe and Japan have effectively capitulated. They agreed to the removal of their trade barriers and America’s imposition of a 15% duty on their exports. These terms are humiliating, so it was at least absurd to see Ursula von der Leyen, the president of the European Commission, praising the deal and calling it a success simply because Trump backed down from his original threat to impose a 30% duty.
The EU and Japan have pledged to invest hundreds of billions of dollars in the U.S. economy, and Trump will meaningfully influence the direction of those investments. Trump calls himself “theman of duties,” and he has clearly succeeded in scaring world leaders, many of whom have not realized that his threats are unrealistic in the long run. In hindsight, they probably would have been better off openly calling his threats a bluff. But Trump, on the contrary, now feels like a winner: on Thursday, he announced new duties against almost every country in the world.
While European authorities were softening the blow of the U.S. duty threat, Trump was pushing through legislation designed to integrate cryptocurrencies into the traditional financial system with minimal oversight by authorities. Shockingly, although Trump’s family owns billions of dollars worth of cryptocurrency assets, Congress has shown little interest in investigating this blatant conflict of interest in the president. The public is more interested in the fact that Trump withheld Jeffrey Epstein’s case files, not his cryptocurrency dealings.
Yes, there are some worthwhile ideas in the Directing and Grounding National Innovation for U.S. Stablecoins Act (aka the GENIUS Act). For example, one of its provisions requires that stablecoins (i.e., cryptocurrencies tied to traditional currencies or commodities, but usually to U.S. dollars) be backed by safe, liquid assets. Overall, however, the law does not provide clear guidelines to curb the “Wild West” of cryptocurrencies, but only a framework for future regulation.
As critics have noted, Trump’s approach to stablecoins is strikingly reminiscent of the free banking era of the 1800s, when America lacked a central bank. Back then, private banks issued their own currencies that were backed by dollars. This often led to disastrous consequences, including fraud, instability, and regular fleecing of depositors. It is expected that when thousands of Stablecoins flood the market, similar problems will arise. Some of this criticism may be exaggerated, however, as today’s leading issuers are generally more transparent and better capitalized than their predecessors in the 19th century.
A more pressing and less noticed problem is that the new law will make it much easier to use dollar-stablecoins for tax evasion. While large denomination paper money poses similar problems, the scope of the steblecoin threat is much broader. Either way, despite all these risks, Trump again got exactly the law he wanted.
Fortunately, the U.S. economy remains resilient amid the uncertainty and chaos created by Trump’s tariff war. Although the economy seems to be slowing down and the July jobs report was weak (a harsh reality that Trump’s firing of the technocrats responsible for producing the statistics will not change), the second quarter data shows that the country is not yet in recession.
In addition, the duty hikes have not yet triggered a surge in domestic inflation, and it appears that America will collect $300 billion in duties in 2025. Importers do not want to pass the costs on to consumers yet, but that will change if the current tariff war ever ends. Some analysts believe that the apparent successes of Trump’s unorthodox policies prove that traditional economic models are wrong. I doubt that, although it is too early to pass judgment.
All this short-term optimism, however, ignores the long-term consequences. While some of former President Joe Biden ‘s decisions were harmful, many economists warn that Trump’s decisions could destroy U.S. institutions and the global economic order. Most important is the likely dramatic weakening of the rule of law if the expanded presidential powers Trump has requested prove permanent. An important frontier will be the upcoming Supreme Court decision, which must determine whether Trump has the authority to impose duties without congressional approval.
If the authority remains, Trump’s total duties will have a long-term impact on economic growth in the US. The rest of the world is unlikely to tolerate Trump’s protectionist policies indefinitely. If for some reason he starts to look weak, foreign governments can be expected to retaliate and impose total duties of their own. Meanwhile, the “big, beautiful bill” will compound the damage, creating a vicious cycle of rising interest rates and inflation amid increased financial repression.
Nevertheless, let’s give Trump credit and recognize that he has started his second presidency in a way that virtually no one (outside of Trump himself and his most ardent supporters) could have even imagined six months ago. Further events should no longer be surprising – and apparently it will be very scary.
Kenneth Rogoff,
former chief economist at the International Monetary Fund and professor of economics
and Professor of Economics and Public Policy at Harvard University, winner of the 2011 Deutsche Bank Award
2011 Deutsche Bank Prize in Financial Economics, co-author, with Carmen Reinhart.
This Time It Will Be Different: Eight Centuries of Financial Folly.
(Princeton University Press, 2011) and author ofOur Dollar, Your Problem(Yale University Press, 2025).
© Project Syndicate, 2025.
www.project-syndicate.org
