Graphics: The Cost of Trump's Trade War - Who's Bearing the Burden?
Numerous academic studies and government reports indicate that tariffs have primarily had a negative impact on the U.S. economy. Research shows that the tariff policies implemented during the Trump and Biden administrations have resulted in increased costs for both consumers and businesses, a decline in economic output and employment, and overall economic difficulties.
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The U.S. has announced a 10-percent tariff on imports from China, citing concerns over fentanyl and other issues. In response, China has initiated countermeasures, including filing a case with the World Trade Organization and imposing retaliatory tariffs on American products.
China's Ministry of Commerce has criticized the U.S. action as a violation of WTO rules and a form of unilateral trade protectionism. Consequently, the State Council Tariff Commission plans to introduce new duties starting February 10, which will include a 15-percent tariff on coal and liquefied natural gas, along with a 10-percent tariff on crude oil, agricultural machinery, large trucks, and pickup vehicles.
Despite increasing trade barriers, China's exports to the U.S. remain significant. In 2024, total exports were approximately $524.7 billion, with top export categories including electrical machinery, textiles, base metals, plastics, and transport equipment. These sectors are likely to be most affected by the renewed tariff conflict.
**Economic impact of tariffs**
Numerous academic studies and government reports indicate that tariffs have generally harmed the U.S. economy. Research shows that the tariff policies initiated during the Trump and Biden administrations have increased costs for both consumers and businesses, decreased economic output and employment, and contributed to wider economic challenges.
A study conducted by the Tax Foundation estimates that these tariffs could lead to a reduction of 0.2 percent in long-term U.S. GDP, a 0.1 percent decline in capital investment, and the loss of 142,000 jobs. Additionally, the International Monetary Fund has projected that removing the tariffs established in 2018-2019 could result in a 4 percent increase in U.S. output over a three-year period.
**Why is Trump pushing for more tariffs?**
Trump believes that tariffs will enhance federal revenue, claiming, "We will take in hundreds of billions of dollars into our treasury and use that money to benefit the American citizens." He also suggests that tariffs will improve the competitiveness of American manufacturers and generate jobs. However, most economists challenge these assertions, cautioning that tariffs act as a hidden tax on American consumers and businesses.
Moreover, Trump considers tariffs a strong negotiating tool. For instance, on January 26, after Colombian President Gustavo Petro declined to permit U.S. military planes carrying deportees to land in Colombia, Trump proposed a 25-percent tariff on Colombian goods. He subsequently withdrew this decision following a negotiated agreement with Colombia.
It's essential to recognize that while tariffs can increase federal revenue, they also impose the same tax burden on U.S. consumers. Implementing consumption taxes tends to be more complex than enacting tariffs, which may clarify Trump's preference for tariffs. Nonetheless, the initial positive effect of tariffs on federal revenue may wane over time if higher tariffs lead to decreased import volumes, thus shrinking the tax base.
Emily Johnson contributed to this report for TROIB News
China's Ministry of Commerce has criticized the U.S. action as a violation of WTO rules and a form of unilateral trade protectionism. Consequently, the State Council Tariff Commission plans to introduce new duties starting February 10, which will include a 15-percent tariff on coal and liquefied natural gas, along with a 10-percent tariff on crude oil, agricultural machinery, large trucks, and pickup vehicles.
Despite increasing trade barriers, China's exports to the U.S. remain significant. In 2024, total exports were approximately $524.7 billion, with top export categories including electrical machinery, textiles, base metals, plastics, and transport equipment. These sectors are likely to be most affected by the renewed tariff conflict.
**Economic impact of tariffs**
Numerous academic studies and government reports indicate that tariffs have generally harmed the U.S. economy. Research shows that the tariff policies initiated during the Trump and Biden administrations have increased costs for both consumers and businesses, decreased economic output and employment, and contributed to wider economic challenges.
A study conducted by the Tax Foundation estimates that these tariffs could lead to a reduction of 0.2 percent in long-term U.S. GDP, a 0.1 percent decline in capital investment, and the loss of 142,000 jobs. Additionally, the International Monetary Fund has projected that removing the tariffs established in 2018-2019 could result in a 4 percent increase in U.S. output over a three-year period.
**Why is Trump pushing for more tariffs?**
Trump believes that tariffs will enhance federal revenue, claiming, "We will take in hundreds of billions of dollars into our treasury and use that money to benefit the American citizens." He also suggests that tariffs will improve the competitiveness of American manufacturers and generate jobs. However, most economists challenge these assertions, cautioning that tariffs act as a hidden tax on American consumers and businesses.
Moreover, Trump considers tariffs a strong negotiating tool. For instance, on January 26, after Colombian President Gustavo Petro declined to permit U.S. military planes carrying deportees to land in Colombia, Trump proposed a 25-percent tariff on Colombian goods. He subsequently withdrew this decision following a negotiated agreement with Colombia.
It's essential to recognize that while tariffs can increase federal revenue, they also impose the same tax burden on U.S. consumers. Implementing consumption taxes tends to be more complex than enacting tariffs, which may clarify Trump's preference for tariffs. Nonetheless, the initial positive effect of tariffs on federal revenue may wane over time if higher tariffs lead to decreased import volumes, thus shrinking the tax base.
Emily Johnson contributed to this report for TROIB News
