Kaushik Basu

ITHACA, NEW YORK – U.S. President Donald Trump’s return to the White House has been accompanied by dramatic economic-policy shifts, setting countries around the world on edge. The new administration has imposed sweeping tariffs on Chinese, Mexican, and Canadian imports – pausing, reinstating, and later granting temporary exemptions for goods compliant with the U.S.-Mexico-Canada Agreement (USMCA). In response, both Canada and Mexico have announced retaliatory tariffs on key U.S. industries, while Trump has vowed to impose “reciprocal” tariffs on “everybody across the board.”

Since no other country wields as much influence over the world economy as the United States, these abrupt and unpredictable policy shifts have fueled fears of a global slowdown, triggering a stock-market selloff – starting in the U.S. itself. In fact, Trump’s trade policies may inflict even greater damage at home than abroad. While some of his moves – especially his administration’s efforts to boost domestic semiconductor manufacturing – could prove beneficial, his erratic policy shifts jeopardize America’s economic stability, undermining its competitiveness and long-term growth.

Trump has long been frustrated by the fact that the U.S. runs trade deficits with many countries. During his recent meeting with Indian Prime Minister Narendra Modi, he specifically raised concerns about America’s $45.6 billion trade deficit with India. In response,........

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