Trump declared the increase in tariffs would generate trillions of dollars to reduce taxes and pay debt. Research done by Gita Gopinath (Harvard professor) and Brent Neiman (University of Chicago professor) studied the actual effects of these tariffs on the economy. They found that the majority of the costs are being paid for by the US when the original point of the tariffs was to increase cost for foreign countries.
Trump has always advocated for increase in tariffs. He increased the tariff rates during his first term too. His actions during this term have been on a much larger scope, affecting 88 countries and 77 products. The average statutory tariff rate is at the highest level that it has been in over a century.
Again, most of this cost has come back to the US. The researchers found that 94% of tariffs were passed to US buyers in 2025. This is hurting the US's relationship with foreign countries. For example, China's share of US imports dropped during the past years.
Tariffs could also affect domestically produced goods. Price increases on intermediate goods may affect companies ability to produce. This would increase the producer price inflation.
Tariffs have brought in new revenue, but it is not directly improving the lives of the American consumers as originally promised by Trump. Without direct results, it is hard to see the real motivations behind the decisions for such large changes on foreign relationships.
https://news.uchicago.edu/story/whos-really-paying-trump-administration-tariffs
I think another interesting aspect of these tariffs is the motivations behind them. Beyond driving revenue, one of the reasons Trump is imposing these tariffs is to encourage domestic production and reduce reliance on other countries. By making the imports more expensive, it forces companies to produce more within the US. This also seems to be tied to a bigger goal of maintaining US economic and global dominance, especially as the economy in China continues to grow which relies heavily on exports. By limiting the growth of competition and boosting domestic manufacturing, this looks more like a strategic move to keep the US in the leading position globally more than anything. While I do agree that we should be more focus on improving the lives of American consumers, this is another aspect that we have to consider.
ReplyDeleteWe also cannot entirely dismiss the tariffs working as leverage. Regardless of whether or not we agree what Trump leverages them for, the concept behind flexing the power we have as the world's largest economy has merit. While tariffs do impose costs on American consumers in the short run, they can function as a bargaining tool to encourage long term gain. Ignoring that dimension entirely would be a oversimplification.
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