As President Trump considers further tariff increases, politicians and investors wait with bated breath. Tariffs have been a centerpiece of his trade strategy, which aims to reshape international relations while also boosting domestic sectors. But what have tariffs truly done for the US economy? This report explores the entire story, including facts, data, and expert analysis.
/*History and context: From Steel to Reciprocal Tariffs.*/
During Trump's first term, tariffs on steel and aluminum, as well as Chinese and Canadian/Mexican imports, were increased. In April 2025, Trump proposed a 10% minimum for non-NAFTA countries and 54-70% increases for certain imports. These actions followed prior trade disputes in 2018-2019. The goal is to eliminate trade deficits while also bringing manufacturing back home.
Each wave, however, sparked a reaction, with Canada, China, the EU, and others imposing counter-tariffs.
/*Economic costs: slowing growth and rising prices*/
Penn Wharton According to Budget Model data, long-term GDP is expected to fall 0.6% and wages by 5%, resulting in a $22,000 lifetime expense for a middle-income household. According to Yale's Budget Lab, short-term consumer price inflation is 2.3%, resulting in a loss of around $3,800 in buying power for households. The CBO forecasts a mild annual inflation rate increase (+0.4 percent) and a GDP decline (-0.06 percent). The OECD expects the United States' growth rate to decline to 1.5% by 2026.
/*Business and Markets: Mixed Signals*/
JPMorganChase's June report concluded U.S. mid-size companies received $82 billion in direct tariff expense, reaching one-third of private-sector employment. A few companies increased domestic sourcing, but the vast majority transferred costs to consumers, which contributed to inflation. Investors remain anxious: S&P 500 futures and the dollar declined on July 4 following news of the new tariff letters. However, the services sector rebounded in June (ISM at 50.8%), and unemployment fell to 4.1% as 147,000 jobs were added.
/*Benefits? A Closer Look*/
Tariff advocates argue they induce domestic production and earn revenue. For instance, CBO puts $2.8 trillion of ten-year deficit reduction on the books. Some manufacturers saw employment gains, but these were offset by more widespread job losses in import-sensitive industries. According to a J.P. Morgan report, manufacturing production revived in response to tariffs after 2018, but overall business sentiment trails behind. Goldman's report finds global growth robust, with central influences limited to 0.2–0.3% of GDP.
/*Ahead: Tariffs, Negotiations and the Economy*/
While Trump's new tariffs are to take effect August 1 (letters sent July 5–9), negotiating with 18 nations, the UK, Vietnam, and India, will be key. Treasury Secretary Bessent says ten more over Labor Day. Economists warn that chronic tariffs risk stifling consumer spending, making Federal Reserve policy harder, and undermining growth, potentially sending the U.S. into recession.