The Consequences of Trump's Economic Policies on the World; From Europe to Iran, China, and Asia

During his first term from 2017 to 2021, Donald Trump disrupted many international treaties, historical friendships, trade relations, and transnational norms with his "America First!" philosophy. What will he do in his second term, and what consequences will his actions have for the world? This article addresses these questions in two parts: first, Trump's economic policies, such as protectionism, deregulation, tax reform, digital technologies, and immigration restrictions; and then the impact of these policies on regions in the world that have special relations with the United States: Europe, a long-standing ally; China, a rival contender; the newly emerging East Asia; the Middle East, disrupted after the Gaza war; and finally, the Islamic Republic of Iran, a challenger to U.S. interests and the existence of Israel. Part One: Trump's Economic Policies In this section, we discuss the economic policies that Donald Trump implemented during his first term and which he claims he will continue in his second term. Protectionism and Conflict with Trade Partners Protectionism is the cornerstone of Donald Trump's economic philosophy in foreign trade. During his first term, he imposed numerous tariffs and trade barriers, such as extensive tariffs on steel and aluminum and on over $360 billion worth of Chinese goods. Trump does not tolerate multilateral international agreements and thus withdrew the U.S. from the Paris Climate Agreement and the Trans-Pacific Partnership, replacing the previous NAFTA (North American Free Trade Agreement) with the new United States-Mexico-Canada Agreement. He prefers bilateral agreements. Trump believes that protectionism can support American industries, reduce the trade deficit, bring jobs back to the U.S., and ultimately free the United States from global exploitation. Some industries benefited from these policies, but tariffs and customs barriers also had unintended consequences, especially for those dependent on global supply chains. Within U.S. borders, job opportunities for workers did not increase (Bown & Kolb, 2023), production and consumption costs rose, and many American producers suffered from retaliatory tariffs imposed by other countries, such as American soybean farmers who lost billions of dollars in export opportunities. Outside U.S. borders, trade relations with historical allies soured, transnational supply and production chains were disrupted (Fajgelbaum et al., 2020), and an ally like Germany faced recession (Fajgelbaum et al., 2021). Trust in global markets was damaged (Office of the U.S. Trade Representative, 2020), global economic growth fell from 3.6% to 3.3% (International Monetary Fund, 2019), and many countries retaliated. For instance, China imposed tariffs on about $100 billion worth of American goods, igniting a trade war between the two countries. However, countries like Vietnam and Mexico benefited from the disruption of the international supply chain and filled the gap to their advantage. In his second term, Trump continues to pursue trade protectionism, seemingly increasing customs tariffs on imports by 10 to 20% and on Chinese goods by up to 60% (Wiley Rein LLP, 2025). Thus, it is likely that once again the same unintended consequences such as trade tensions, supply chain disruptions, and dissatisfaction and retaliation from trade partners will emerge. Trump's decision to withdraw the U.S. from the World Health Organization and the Paris Agreement was controversial. Deregulation Trump believes that excessive government intervention undermines efficiency and innovation in business, and thus deregulation is necessary. During his first term, he ordered federal agencies to follow a "two-for-one" rule, meaning for every new regulation, two existing regulations must be removed. He significantly altered environmental, financial, and labor laws to the extent that it reportedly saved companies about $98 billion (Wallach & Kennedy, 2025). Some economists consider deregulation essential for the efficiency and profitability of companies, while others warn of the risks it poses, such as ecosystem collapse, the loss of financial safeguards, and instability; many criticized Trump's policy of expanding fossil fuels due to the environmental costs associated with it and pointed out the neglect of preparing American industries for the transition to renewable energy (Council on Foreign Relations, 2024). In his second term, Trump will continue deregulation, as he has ordered the establishment of a "Department of Government Efficiency" (DOGE) to simplify government bureaucracy, modernize technology, and reduce environmental regulations, declaring its goal as "modernizing federal technologies and software to maximize government productivity and efficiency." However, this approach may revive environmental and social concerns. Digital Technology and Cryptocurrency Donald Trump has recognized the value of digital technology, artificial intelligence, and blockchain for America's competitiveness in the global market, and thus, during his first term, federal investment in research and development, oversight, and workforce training in artificial intelligence increased (Office of Science and Technology Policy, 2019). Trump also believes in the power of cryptocurrency but fears its use in fraud, money laundering, and destabilizing national monetary policy, and thus increased oversight of digital exchanges and initial cryptocurrency offerings. Most economists believe that artificial intelligence and blockchain enhance innovation and competitiveness in the U.S. and expand access to financial services for the underprivileged by reducing transaction costs and increasing transparency. Critics, however, point to their use in wrongdoing and destabilizing economies, calling for stricter regulations. In his second term, Trump seeks to support artificial intelligence and blockchain while also increasing regulations and oversight of cryptocurrency. Finding a balance between supporting entrepreneurship and government control will not be easy. Trump called the spread of Chinese artificial intelligence a wake-up call for American companies. Immigration Restrictions and Economic Realities Trump believes that reducing legal and illegal immigration benefits American workers and wages, and thus, during his first term, he banned travel from certain countries, increased deportations, and significantly limited the issuance of H-1B work visas despite the needs of technology and healthcare sectors. Critics argue that such policies harm the competitiveness of industries reliant on immigrant labor, as Silicon Valley expressed concern that reduced access to foreign talent would have negative consequences for innovation and competition. Skilled immigrants in the U.S. represent 16% of inventors, 23% of innovations, and expand American collaboration and thought worldwide (Bernstein et al., 2023). The Brookings Institution found that strict immigration controls reduce GDP due to a shrinking workforce and declining productivity growth (Perry, 2024). In his second term, Trump will continue to be strict about immigration, visa issuance, and refugee quotas. It is expected that industry owners who depend on immigrant labor will protest. The tension between political beliefs and economic realities will continue. Tax Reform and Business Exchanges Trump believes in the effectiveness of tax reforms to reduce financial burdens, investment, and economic growth, and thus, in his first term, he passed a law in 2017 that reduced the corporate tax rate from 35% to 21%. This action was the largest tax cut in U.S. history and significantly increased corporate profits and shareholder returns. However, critics believe that most of the tax savings were used for stock buybacks rather than investing in job creation or increasing wages (Economic Policy Institute, 2019). Additionally, the tax cut led to an increase in the federal budget deficit, which exceeded one trillion dollars in 2020 (Congressional Budget Office, 2021). In his second term, Trump will reduce corporate taxes and is expected to bring the rate below 20%, which will undoubtedly be effective in stimulating investment and creating job opportunities, but it is also possible that increasing the budget deficit and rising income inequality will lead to social tensions. The U.S. temporarily halted almost all foreign aid for review. Part Two: The Consequences of Trump's Economic Policies on the World What impact will these economic policies have on key regions of the world? This section addresses this topic. The United States It is possible that added tariffs, deregulation, and tax cuts will increase corporate profits and the stock market in the U.S. However, if these policies are poorly designed, they will have unintended consequences such as rising consumer prices and producer costs, as well as retaliation from trade partners, as increasing tariffs on Mexican imports may disrupt trade relations between the two countries and negatively impact American automakers' activities in Mexico. Limiting the immigration of talent and labor to the U.S. could lead to a shortage of human resources in the technology, healthcare, and other sectors, halting innovation and growth. At the same time, it raises wages in low-skilled sectors, thereby increasing consumer costs. If reckless deregulation leads to increased income inequality, damage to the ecosystem, and weakened financial safeguards, it is possible that Trump's core social base will weaken. The tax cuts, which are intended to stimulate investment and employment, could reduce the government's ability to fund infrastructure and social services and decrease inequalities, potentially inciting social unrest. Smart government investment in artificial intelligence and blockchain supports U.S. leadership in the global market, but strict regulations for government control over cryptocurrencies may drive related activities to countries with less oversight and harm U.S. leadership. Europe Trump's trade tensions with historical allies across the Atlantic and withdrawal from multilateral agreements disrupt Europe's supply chains and export industries. The corporate tax cuts may also lure investment, especially in digital technology and manufacturing, from Europe to the U.S. Furthermore, European companies working with both the U.S. and China are concerned about escalating trade tensions between the two countries and their consequences. Europeans are likely to react strongly and retaliate (Credendo, 2025). They may impose regulations to challenge American companies' activities and attract talent and skilled workers who face obstacles to immigrating to the U.S. China Tariffs exceeding $350 billion on Chinese goods and non-tariff restrictions on companies like Huawei and TikTok have provoked a response from China. In retaliation, China imposed heavy tariffs on American products, including agricultural goods, and expanded its relations with alternative partners like the European Union, Russia, and developing Asian and African economies. For instance, after the U.S. withdrew from agreements like the Trans-Pacific Partnership, it replaced the U.S. by implementing collaborations such as the Regional Comprehensive Economic Partnership, thereby increasing its regional influence. China also took advantage of Trump's focus on fossil fuels and challenged U.S. leadership in renewable energy production. Beijing has focused on innovation and support for cryptocurrencies domestically to build resilience against the U.S. and reportedly offers more incentives to American companies like Apple, Amazon, and Tesla, which have moved parts of their production chains to China, to retain them and even welcome more of their activities. Trump's policies have also impacted other Asian countries. South Korea's exports were harmed due to disrupted trade flows and supply chains, and Japan, a historical ally of the U.S., was forced to shoulder a larger share of defense costs and heavier tariffs on its exports. Vietnam and Malaysia may benefit from these conditions and attract companies forced to exit China. The Middle East Donald Trump's administration, by increasing investment in domestic oil and gas production, supporting production and exports with tax incentives, reducing environmental regulations, and adhering to a self-sufficiency policy, will undoubtedly impact oil supply in the global market and subsequently affect oil economies. Trump's decisions regarding travel bans, restrictions on accepting refugees, and strict controls on remittances from immigrants in the U.S. disproportionately target Middle Eastern countries, thereby harming regional economies and increasing humanitarian responses and geopolitical tensions in the region. The Middle East is welcoming blockchain technology to expand citizens' access, especially for the underprivileged, to financial services. Trump's hesitance in this regard will open the door for China and other global players. Major Domestic and Global Changes Favoring Donald Trump's Administration The Islamic Republic of Iran U.S. sanctions against the Islamic Republic of Iran have a long history, beginning with the hostage crisis of U.S. embassy staff in 1979 (1358 in the Persian calendar) and reaching their peak during Trump's first term.