Trump’s Tariffs: Key Effects!

Tariffs are typically charged as a percentage of the price a buyer pays a foreign seller. In the United States, tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the country. 

U.S. tariff rates vary: They are generally 2.5% on passenger cars, for instance, and 6% on golf shoes. Tariffs can be lower for countries with which the United States has trade agreements. Before the U.S. began imposing 25% tariffs on good from Canada and Mexico, most goods moved between the United States and those countries tariff-free because of President Donald Trump’s U.S.-Mexico-Canada trade agreement.

 

Mainstream economists are generally sceptical about tariffs, considering them an inefficient way for governments to raise revenue.

 

Trump is a proponent of tariffs. He insists that they are paid for by foreign countries. In fact, it is importers — American companies — that pay tariffs, and the money goes to the U.S. Treasury. Those companies typically pass their higher costs on to their customers in the form of higher prices. That’s why economists say consumers usually end up footing the bill for tariffs.

 

Tariffs may hurt foreign countries by making their products pricier and harder to sell abroad. Foreign companies might have to cut prices — and sacrifice profits — to offset the tariffs and try to maintain their market share in the United States. Yang Zhou, an economist at Shanghai’s Fudan University, concluded in a study that Trump’s tariffs on Chinese goods inflicted more than three times as much damage to the Chinese economy as they did to the U.S. economy.

 

By raising the price of imports, tariffs can protect home-grown manufacturers. They may also serve to punish foreign countries for unfair trade practices such as subsidizing their exporters or dumping products at unfairly low prices.

 

Before the federal income tax was established in 1913, tariffs were a major revenue source for the government. From 1790 to 1860, tariffs accounted for 90% of federal revenue, according to Douglas Irwin, a Dartmouth College economist who has studied the history of trade policy. Tariffs fell out of favour as global trade grew after World War II. The government needed vastly bigger revenue streams to finance its operations.

 

In the fiscal year that ended Sept. 30, the government collected around $80 billion in tariffs and fees, a trifle next to the $2.5 trillion that comes from individual income taxes and the $1.7 trillion from Social Security and Medicare taxes. Still, Trump favours a budget policy that resembles what was in place in the 19th century.

 

Tariffs can also be used to pressure other countries on issues that may or may not be related to trade. In 2019, for example, Trump used the threat of tariffs as leverage to persuade Mexico to crack down on waves of Central American migrants crossing Mexican territory on their way to the United States. Trump even sees tariffs as a way to prevent wars.

 

Tariffs raise costs for companies and consumers that rely on imports. They’re also likely to provoke retaliation. The European Union, for example, pushed back against Trump’s tariffs on steel and aluminum by taxing U.S. products, from bourbon to Harley-Davidson motorcycles. Likewise, China has responded to Trump’s trade war by slapping tariffs on American goods, including soybeans and pork in a calculated drive to hurt his supporters in farm country.

 

A study by economists at the Massachusetts Institute of Technology, the University of Zurich, Harvard and the World Bank concluded that Trump’s tariffs failed to restore jobs to the American heartland. The tariffs “neither raised nor lowered U.S. employment’’ where they were supposed to protect jobs, the study found.

 

Despite Trump’s 2018 taxes on imported steel, for example, the number of jobs at U.S. steel plants barely budged: They remained right around 140,000. By comparison, Walmart alone employs 1.6 million people in the United States.

 

The retaliatory taxes imposed by China and other nations on U.S. goods had “negative employment impacts,’’ especially for farmers, the study found. These retaliatory tariffs were only partly offset by billions in government aid that Trump doled out to farmers. The Trump tariffs also damaged companies that relied on targeted imports.

 

U.S. stock markets have also tumbled over concerns that President Trump’s tariffs on Canada, Mexico and China will lead to a wider trade war and hurt the economy. The Dow Jones Industrial Average dropped 1.5%, while the Nasdaq, where many technology companies' shares are listed, fell 0.35%. The S&P 500 closed 1.2% lower. American retailers and carmakers were among the hardest hit, with electronics chain Best Buy's share price closing more than 13% lower.

 

As Prime Minister Trudeau mentioned at a recent press conference, this (tariffs) is a dumb idea from a so-called smart President. Tariffs will impact cost of production, increase inflation, create higher unemployment, cause stocks to spiral downwards and may lead a country into a recession, if not depression.

 

What can we do? Boycott U.S. products like Tesla; seek retaliatory tariffs; report to WTO; and have a “America Last” movement. That’s war!

 

References:

Here’s what tariffs are and how they work, Paul Wiseman, The Associated Press, 4 March 2025

US stock markets fall amid trade war fears, Jennifer Meierhans and Dearbail Jordan, BBC News, 5 March 2025