U.S. President Donald Trump unveiled a controversial "reciprocal tariffs" proposal this week, claiming it would protect middle-class wages. However, the Washington-based Cato Institute swiftly challenged the policy's foundational arguments, calling Trump's assertion that free trade undermines wages a "misleading narrative."
In a report released Thursday, Cato economists argued that historical data contradicts claims of trade-driven wage suppression, noting U.S. real median household income grew by $5,000 between 1993 and 2015 despite expanded globalization. The think tank warned that escalating tariffs risk triggering retaliatory measures, potentially reversing post-pandemic economic recovery trends.
"Tariffs function as hidden taxes on consumers and businesses," the analysis stated, highlighting potential impacts on Asian export economies and global supply chains. While Trump framed the policy as a tool for fairer trade, critics caution it could accelerate inflationary pressures already affecting key Asian manufacturing partners.
Market analysts suggest investors watch for ripple effects across Asian tech and automotive sectors, where tariff wars could disrupt carefully calibrated production networks. The debate emerges as governments across Asia weigh strategies to maintain economic stability amid shifting U.S. trade priorities.
