Since Donald Trump moved back into the White House in January 2025, his administration has launched a wide-ranging campaign of so-called "reciprocal" tariffs against a half-dozen dozen countries, bringing an end to decades of trade liberalization. On April 2—officially dubbed by the White House as "Liberation Day"—Trump unveiled a set of new import tariffs that pushed the US's average effective tariff rate to 18.2%, a post-1934 high. According to Yale's Budget Lab, that is a whopping rise from 2.4% in 2024, the final year of his predecessor. While some of the tariffs have been diluted over the years through bilateral agreements with friends like the UK, Vietnam, Japan, and the EU, most industry-specific tariffs, especially on automobiles and steel, remain in place and disrupting the industries in toto, the BBC reported.
Revenue bonanza, but economic losses in the making
The increase in tariffs has brought about an abrupt surge in US government revenues. Government figures in June 2025 reveal tariff receipts as much as $28 billion in one month, almost three times the monthly average in 2024. The Congressional Budget Office (CBO) calculates that in the coming decade, these tariffs could slash US borrowing cumulatively by $2.5 trillion. But this fiscal savings comes at a cost. The CBO warns that higher tariffs will decrease overall economic activity, decelerate productivity, and in the long run cost more to impose than they save—especially when matched by Trump's across-the-board tax cuts that reduce government revenues elsewhere.
Trade deficit widens, rather than narrows
Among Trump's primary justifications for the tariffs is to reduce the US trade deficit—bilateral deficits especially with countries like China. But the initial effect has done the reverse. During the first half of 2025, US merchandise imports accelerated as companies rushed to stock up before tariffs took effect. Meanwhile, exports grew modestly. Result: a record $162 billion March trade deficit in goods, before easing in June to $86 billion. Economists point out that such deficits are less the product of unfair trade and more a reflection of underlying imbalances—i.e., America's tendency to spend more than it earns. Therefore, tariffs alone may not be able to modify the underlying trend.
China's exports to the US fall-but resurface elsewhere
Tariffs on Chinese imports ranged from a high of 145% to 30%. No surprise there. Chinese exports to the US declined 11% in the first half of 2025 compared with the first half of 2024. But Beijing has simply redistributed its business. Exports to India went up 14%, to the ASEAN members by 13%, to the EU by 7%, and to the UK by 8%. Chinese manufacturers are "tariff jumping," economists argue, by sending exports via countries like Vietnam and Malaysia where they finalize production before they sell into the US. This is what happened with solar panels in Trump's first term.
New trade blocs emerge in response
While the US is building walls, others are creating bridges. Several economies have advanced negotiations to diversify away from American markets. India and the UK completed a trade agreement three years in the making. The European Free Trade Association—Norway, Switzerland, Iceland, and Liechtenstein—inked a new agreement with Mercosur, the South American trading bloc. The EU is also upping negotiations with Indonesia, while Canada is considering a free trade agreement with ASEAN. For most countries, the actions are both defensive and strategic—guaranteeing access to markets as global protectionism rises.
China turns to Brazil as US farmers get pinched
One of China's most severely impacted target areas of retaliation has been US agriculture. In 2025, China imposed punitive new tariffs on US soybeans, cutting US exports. In June alone, China imported just 1.6 million tons of US soybeans, compared with 10.6 million tons from Brazil. The trend is continuation of a pattern that began during Trump's first term when Washington subsidized US farmers to offset losses from equivalent Chinese tariffs. The long-term concern is that China's agriculture tilt could become permanent at the expense of the US losing an important export market.
American consumers are paying more
Although the full inflationary effect of the tariffs emerged gradually, hints are now appearing. In June 2025, the US official inflation rate crept up to 2.7%, a marginal step from May's 2.4%, but economists see a pattern. Imported goods and tariff-affected domestic goods are rising faster than tariff-sheltered domestic goods, reports Harvard University's Pricing Lab. Electronics, appliances, sporting goods, toys, and books all saw strong advances. Initially, retailers had stockpiled past price hikes, but with inventory dwindling and tariffs ongoing, American shoppers are now footing the bill.
A shifting global order
Donald Trump's aggressive tariff strategy is redefining world trade in the raw. While it has given a temporary receipts boost to the US Treasury and invigorated negotiations with some allies, the longer-term effects—increased prices, increased trade deficits, and reshaping of supply chains—are already manifesting. As countries respond with new alliances and consumers shell out increasingly, the globe is moving into a period of economic nationalism that may prove harder to unwind than to increase.
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