Did you know that Donald Trump's tariffs are equivalent to one of the largest tax increases in the United States in decades, and that studies have shown that they reduce real income in the U.S. as well as adversely affecting its GDP?

Tariff is a duty (a tax) imposed by a national government, customs territory, or supranational union on imports (or, exceptionally, exports) of goods. Since the 1980s, Trump had for long advocated for import tariffs as a tool to regulate trade and retaliate against foreign nations that he believes have been disadvantageous to Americans. In his campaigns for the US presidency, Trump promised to use tariffs to achieve a wide range of goals, including preventing war, reducing trade deficits, improving border security, and subsidizing childcare.

Tariffs during the first presidency of Trump as the 45th president of the United States in 2017 involved protectionist trade initiatives against other countries, most notably China. It principally involved tariffs on foreign imports imposed by Trump. 

In January 2018, Trump imposed tariffs on solar panels and washing machines of 30–50%. In March 2018, he imposed tariffs on steel (25%) and aluminum (10%) from most countries, which, according to Morgan Stanley, covered an estimated 4.1% of U.S. imports. In June 2018, this was extended to the European Union, Canada, and Mexico. The Trump administration separately set and escalated tariffs on goods imported from China, leading to a trade war, an economic conflict often resulting from extreme protectionism, in which states raise or implement tariffs or other trade barriers against each other as part of their commercial policies, in response to similar measures imposed by the opposing party.

Trading partners implemented retaliatory tariffs on U.S. goods. In June 2018, India planned to recoup trade penalties of $241 million on $1.2 billion worth of Indian steel and aluminum, but attempted talks delayed these until June 2019 when India imposed retaliatory tariffs on $240 million worth of U.S. goods. Canada imposed matching retaliatory tariffs on July 1, 2018. China implemented retaliatory tariffs equivalent to the $34 billion tariff imposed on it by the U.S. 

Tariff negotiations in North America were relatively more successful, with the U.S. lifting the steel and aluminum tariffs on Canada and Mexico on May 20, 2019, joining Australia and Argentina in being the only nations exempted from the regulations. However, on May 30, Trump unilaterally announced his intention to impose a five percent tariff on all imports from Mexico beginning on June 10, with tariffs increasing to 10% on July 1, and by another 5% each month for three months, "until such time as illegal migrants coming through Mexico, and into our Country, STOP", adding illegal immigration as a condition for U.S.-Mexico tariff negotiations. The move was seen as threatening the ratification of the United States–Mexico–Canada Agreement (USMCA), the North American trade deal set to replace the North American Free Trade Agreement (NAFTA). The tariffs were averted on June 7 after negotiations.

A May 2019 analysis conducted by CNBC found Trump's tariffs are equivalent to one of the largest tax increases in the U.S. in decades. Studies have found that Trump's tariffs reduced real income in the United States, as well as adversely affecting U.S. GDP. Some studies also concluded that the tariffs adversely affected Republican candidates in elections. 

President Trump's successor, Biden, kept most of the tariffs in place, dropping tariffs on European steel while further expanding tariffs on goods such as EVs and semiconductors from China, resulting in more tax revenue being collected from tariffs under Biden than under the first Trump administration.

Tariffs implemented during the second presidency of Trump have marked a sharp escalation in protectionist trade policies in the United States. President Trump announced a series of steep tariffs on nearly all goods imported to the US. In April 2025, the US trade-weighted average tariff rose from 2% to an estimated 24%, the highest level in over a century, including under the Smoot–Hawley Tariff Act of 1930.

Trump escalated an ongoing trade war with China, raising baseline tariffs on Chinese imports to an effective 54% after April 9, 2025. He also initiated a new trade war with Canada and Mexico by imposing a 25% tariff on most goods from the countries, though he later granted indefinite exemptions for goods compliant with the USMCA. Trump framed these actions as a way to hold the countries accountable for contraband drug trafficking and illegal immigration, while also supporting domestic manufacturing. He later imposed a 25% tariff on imported steel, aluminum, and automotive products from all countries, with tariffs on auto parts expected to follow.

On April 2, 2025, a day he called "Liberation Day", Trump signed an executive order imposing a minimum 10% tariff on all US imports with elevated tariffs on 57 nations and limited exceptions. The general tariffs took effect on April 5, 2025. Import tariffs on the 57 nations, ranging from 11% to 50%, began on April 9, 2025. Following retaliation by China, Trump increased tariffs on Chinese goods by an additional 50%, resulting in an effective 104% also beginning on April 9.

These controversially termed "reciprocal tariffs" prompted retaliation from trade partners and triggered an immediate stock market crash. According to the Trump administration's reciprocal tariff formula, trade deficits are viewed as inherently harmful and should be eliminated. Economists cited by the administration said their research had been misinterpreted and that the administration's formula and goals were overly simplistic and illogical. The tariffs have contributed to lowered GDP growth projections by both the Federal Reserve and OECD, as well as rising expectations of a recession.

Although Trump has said foreign countries pay his tariffs, US tariffs are fees paid by US consumers and businesses either directly or in the form of increased prices. For example, a car imported to the US with a value of $50,000 subject to a 25% tariff, would face a $12,500 charge. The charge is physically paid by the domestic company that imports the goods, not the foreign company that exports them. So, in that sense, it is a straightforward tax paid by domestic US firms to the US government. Over the course of 2023, the US imported around $3.1tn of goods, equivalent to around 11% of US GDP. And tariffs imposed on those imports brought in $80bn in that year, around 2% of total US tax revenues.

The question of where the final “economic” burden of tariffs falls, as opposed to the upfront bill, is more complicated. If the US importing firm passes on the cost of the tariff to the person buying the product in the US in the form of higher retail prices, it would be the US consumer that bears the economic burden. But if the US importing firm absorbs the cost of the tariff itself and doesn’t pass it on, then that firm is said to bear the economic burden in the form of lower profits than it would otherwise have enjoyed. Alternatively, it is possible that foreign exporters might have to lower their wholesale prices by the value of the tariff in order to retain their US customers. In that scenario, the exporting firm would bear the economic burden of the tariff in the form of lower profits. All three scenarios are theoretically possible.

But economic studies of the impact of the new tariffs that Trump imposed in his first term of office between 2017 and 2020 suggest most of the economic burden was ultimately borne by US consumers. Yet Trump has used another economic justification for his tariffs: that they protect and create US domestic jobs.

SOURCES: Wikipedia | BBC

#penglobalfactfile #tariffs #tradewar #Trump