Trump Says Tariffs Helped Strengthen The U.S. Economy

In case you didn’t see it, late Friday afternoon President Trump posted an op-ed piece on the Wall Street Journal website entitled: “My Tariffs Have Brought America Back,” and it appeared in the Saturday morning print edition.

I don’t think people focused on it because everybody was talking about Mr. Trump’s superb nomination of Kevin Warsh to be Fed chairman. Yet it’s worth revisiting his piece, which is kind of a rebuttal to all the criticisms by the Wall Street Journal Editorial Board, regarding Mr. Trump’s tariff policies.

Anyway, the president makes a lot of important points. For one thing, he notes that there was never any retaliation against his tariffs, and therefore all the Smoot-Hawley 1930s talk turned out to be false alarms.

Instead of retaliation there were deals, and Mr. Trump points out deals with Communist China, Great Britain, the European Union, Japan, and a number of countries in Southeast Asia.

Yet as he said, the deals reduced barriers for American exports, and may have well led to stock market booms, not only here in America, but in all the countries that came to the dealmaking table.

Meanwhile, I’ll just insert that Smoot-Hawley raised tariffs to 60 percent or 70 percent. Yet most of the effective Trump tariffs are really closer to 15 percent. And as the president points out, a couple of $100 billion in tariff-related revenues have helped lower the budget deficit by as much as 27 percent.

Meanwhile, American exports are way up, imports are lower, and the trade deficit has narrowed substantially.

Mr. Trump gives much of the credit for the economic boom to the One, Big, Beautiful Bill, regarding tax cuts, lighter regulation, and “Drill, Baby, Drill.”

Yet his policy of trade reciprocity, really does look like a great success.

To quote Mr. Trump: “We have proven, decisively, that, properly applied, tariffs do not hurt growth — they promote growth and greatness, just as I said all along.”

And he also cites a Harvard Business School study that foreign producers and non-American big corporations are paying at least 80 percent of the tariff costs. Very interesting.

He also notes that the various trade deals prompted by the tariff tool are generating tremendous foreign investment in America.

Now, Mr. Trump likes to use $18 trillion. The official White House website says $9.6 trillion. Of course he loves to embellish, and anyway who’s to say he won’t get the commitments? And anyway, just getting half of it is remarkable.  

Another important point in his tariff piece was the use of the levies in international diplomacy, where trade diplomacy became an important national security tool. And this is something the pending Supreme Court decision hopefully will fully take into account.

Just today, Mr. Trump got an agreement from India to stop buying Russian oil, in return for which America will lower its tariff on India to 18 percent from 25 percent. Another interception of trade policy with foreign policy.

All in, the Trump reciprocal tariffs have surely contributed to the Trumpian economic boom.

And you know what folks? In another column I’m going to tell you why he’s really a free trader at heart.

Lawrence Kudlow is a Fox News Media contributor and host of both “Kudlow” on weekdays and the nationally syndicated “Larry Kudlow Show” each Saturday. This column is adapted from his monologues on “Kudlow.”

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How tariffs are reshaping global currency and capital flows, and why the dollar’s role matters for the global economy.

Tariffs and the Dollar

Our Tariff-Era Dollar, Your Problem

By Qiyuan Xu, Project Syndicate |Feb 2, 2026

The greenback’s effective depreciation on the trade side and its continued stability on the financial side will likely not last forever, at which point the US economy could be forced into a painful rebalancing. But until that day arrives, non-US economies should not assume that a weaker dollar will deliver the usual relief.

BEIJING – In 2025, the dollar index, which measures the greenback’s strength against a basket of major currencies, fell by roughly 9.4%. Over the same period, the United States’ average effective tariff rate rose by around 14.4 percentage points, from 2.4% to 16.8%, according to the Yale Budget Lab. Taken together, these shifts imply that, in the import trade domain, the US experienced an effective exchange-rate depreciation of around 24%.

Such a scenario is politically attractive to the US, because it protects manufacturing competitiveness and generates additional tariff revenue, while the dollar remains relatively stable. That stability, in turn, helps support the prices of US Treasuries and other dollar assets, reducing the risk of a vicious cycle of broad depreciation, unmoored inflation, capital outflows, and financial-market stress.

But the balance-of-payments “mirror” remains. So long as the dollar is the world’s reserve currency of choice, persistent net capital inflows into the US – which necessarily correspond to America’s current-account deficit – are unlikely to disappear, making structural imbalances hard to resolve. In fact, this dynamic may generate additional costs, which will likely fall disproportionately on non-US economies, especially emerging markets.

Historically, the dollar has weakened when the US Federal Reserve eases monetary policy, US long-term yields fall, and global investors’ risk appetite improves – conditions that loosen international financing constraints and expand offshore dollar liquidity. But this time around, the dividend from a weak dollar may be sharply discounted, because tariffs act as a wedge that “pre-adjusts” relative prices in international trade, reducing the nominal exchange-rate depreciation required for external rebalancing.

That shift has three consequences for the rest of the world. First, trade and investment slow together, weakening the microfoundations of dollar liquidity spillovers. US President Donald Trump’s reciprocal tariffs have dragged down growth in global goods trade. And when trade flows contract, corporate demand for dollar-denominated trade finance and supply-chain credit falls, and cross-border dollar creation slows accordingly.

Moreover, in October 2025, United Nations Trade and Development (UNCTAD) noted that global foreign direct investment has remained weak – down 3% in the first half of 2025 – and that persistent tariff uncertainty has driven investors to adopt a wait-and-see stance. This implies that even if the greenback weakens in nominal terms, the periphery may receive less effective dollar liquidity than it does in a typical depreciation cycle.

Second, tariff-induced price pressures push up inflation expectations and amplify policy uncertainty in the US, which may impede declines in long-term yields and the term premium, thereby constraining the fall in global interest rates for risk-free assets. Heightened uncertainty can also lift risk premia worldwide, dampening the spillover effects of a weaker dollar, including higher risk appetite and renewed capital inflows into emerging markets.

To be clear, the effective exchange-rate depreciation of around 24% reflects the relative price distortion on the trade side; it does not suggest that import prices mechanically rise by that amount. Even so, its effects on inflation and monetary policy may appear with a lag and become more visible in 2026. The International Monetary Fund found that tariff pass-through to prices has so far been relatively mild, but that the effects could be delayed. At the same time, it emphasized that higher tariffs and uncertainty complicate the trade-offs faced by central bankers.

Third, emerging markets will struggle with asymmetric shocks and shrinking policy space. As I have previously argued, “reciprocal” tariffs will widen the North-South divide, because lower-income countries are often hit with higher rates. In this situation, weaker exports and declining capital inflows more readily lead to slower growth and currency depreciation – a trap from which policymakers struggle to escape.

Currency depreciation on its own can trigger imported inflation or increase the burden of dollar-denominated debt, placing central bankers in the challenging position of balancing interest-rate spreads, exchange-rate stability, and foreign-exchange intervention. This means that financial conditions may not improve as much as one would expect in a weaker dollar environment.

In short, this is not simply another round of protectionism. Instead, adjustment pressures have been reallocated: For the US economy, the trade side receives an “effective” depreciation through the tariff wedge, while the financial side seeks stability. Whether such an arrangement can persist, however, depends on four conditions.

First, tariff-driven advantages must translate into real additional capacity and productivity gains, rather than remaining a temporary redistribution of rents. Second, inflation must be contained. If tariffs entrench core inflation over time, the Fed will have much less room for maneuver, and term premia could rise, undermining the financial stability that the strategy is meant to preserve.

Third, non-US economies must continue to comply; otherwise, an increase in retaliatory action would eat away at America’s trade-side gains and create more uncertainty. Fourth, the world must continue to believe that US debt is a safe asset. If term premia continue to rise amid mounting concerns about America’s fiscal sustainability, the financial side’s “relative stability” will weaken and could spill back into the real economy.

If any of these conditions is not met – if reshoring fails to deliver, inflation proves sticky, or external retaliation escalates – the dollar’s effective depreciation on the trade side and its continued stability on the financial side may begin to work against each other, forcing the US economy into a painful rebalancing. But until that day arrives, non-US economies should not assume that a weaker greenback will deliver the usual relief. We may be entering a tariff-era version of what then-US Treasury Secretary John Connally famously described in 1971 as “our currency, your problem.”

Qiyuan Xu, a senior fellow at the Chinese Academy of Social Sciences, is the author of many books, including Reshaping the Global Industrial Chain: China’s Choices. His research focuses on China’s macro economy, US-China trade relations, reforms of the international monetary system, and global supply-chain dynamics.

Copyright Project Syndicate

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