Written by Julio Pijem
Not much time has passed since Trump’s administration, and tension has arised. Donald Trump, current president of the United States, decided to impose tariffs of Not much time has passed since Trump’s administration, and tension has arisen. Donald Trump, current President of the United States, has decided to impose tariffs of 25% on imports from both Canada and Mexico, and 10% on imports from China. While Trump sees this as a benefit for the U.S. economy, the objective truth is that they will harm the economy rather than induce a manufacturing rebirth.
Why does Trump want to impose such tariffs? As an experienced businessman and connoisseur of the economy, he should have valid reasons. One reason for such imposition is to reduce the trade deficit. The U.S. imports more than it exports, so according to him, the imposition of tariffs should solve this issue. The second reason is to encourage businesses to manufacture at home. When tariffs are imposed, U.S. consumers and businesses are likely to purchase domestic items due to the increased price that foreign exporters charge as a result of the tariffs. Although these propositions make sense and can be viewed as logical reasons, the truth is that the negative effects far outweigh the positives.
As stated above, the proposition that tariffs reduce the trade deficit is incorrect. As tariffs make imports more expensive, Americans buy fewer foreign goods. Therefore, there is less demand to swap the dollar for foreign currencies. With fewer dollars sold, the result is that the value of the dollar increases, making American exports more expensive for foreigners. This reduces global demand for American exports (The Economist, n.d.). This essentially becomes a tax on exports, so even if imports decrease, exports decrease as well. A trade balance is not achieved because the goal is to reduce imports without reducing exports. This said, if tariffs do not solve the trade deficit issue, we need to ask ourselves: “Why does the U.S. import more than it exports?” The answer to this question is that the driver of the trade imbalance is that the U.S. is a consumer-led economy. “The reason for the deficit can be boiled down to the United States as a whole spending more money than it makes, which results in a current account deficit” (Feldstein, n.d.). In other words, America has a low savings rate. Consequently, Trump should find ways to decrease consumer spending, such as increasing interest rates to induce saving.
Now, tariffs do help businesses manufacture at home and create jobs. As tariffs are a tax on imports, foreign countries need to pay more to provide these goods and services to the U.S. Due to this tax, foreigners increase the price of their exports, making American consumers and businesses purchase domestically. However, what happens is that these domestic businesses increase the price of their goods and services because they know consumers will still purchase from them due to reduced competition. So, a tax that was intended for foreign countries is borne by American consumers. Kamala Harris called Trump’s policies a “tax on the American people” and warned of sky-high prices. There are also certain businesses that rely on specific inputs to produce. These businesses also bear the increased price from domestic manufacturers of steel and aluminum—another example of tariffs being borne by American citizens. In fact, a 10% universal levy would cost each American household an average of $2,000 a year (The Economist, n.d.). Also, even if tariffs help manufacture at home, thereby creating more jobs, evidence shows that the share of Americans employed in manufacturing is lower today than when tariffs first came into effect in Trump’s past administration.
Consumers are facing high prices as a result of the imposition of tariffs, and when this happens, inflation can occur. When there is inflation, the purchasing power of consumers decreases, and it is a fact that consumption plays a large role in the U.S. GDP. Thus, if consumers’ personal finances continue to decline, it can get to a point where consumption decreases and economic growth dries up. “And while that will turn out to be deflationary, the economy may need to endure a recession to get there. Trump did warn that there may be some near-term pain to suffer while he balances the books, and it’s already showing up in the data before tariffs have even been implemented” (Simpson, n.d.).
Even Trump is aware that the imposition of tariffs will cause pain. A recession is what we seek to avoid, and with these absurd plans, the U.S. economy is heading in that direction. Trump cannot see tariffs as a solution to the trade deficit, and their implementation does not even help create more jobs. That said, we should look at solutions that directly address a problem, not ones that create more.
References
Casselman, B. (2025, March 18). Trump Says a Recession Would Be Worth It, but Economists Are Skeptical. The New York Times. https://www.nytimes.com/2025/03/18/business/economy/trump-recession-tariffs-inflation.html
Fisk, T. (2018, November 2). Aerial View of Cargo Ship · Free Stock Photo. Pexels. https://www.pexels.com/photo/aerial-view-of-cargo-ship-1554646/
McBride, J., & Chatzky, A. (2019, March 8). The U.S. Trade Deficit: How Much Does It Matter? Council on Foreign Relations. https://www.cfr.org/backgrounder/us-trade-deficit-how-much-does-it-matter
The Economist. (2025). The Economist. https://www.economist.com/search?q=donald+trumps+pursuit+of+tariffs+will+make+america+poorer