TRUMP TARRIF POLICY

During his second term, United States President Donald Trump initiated a global trade conflict by implementing a succession of high tariffs impacting almost all products imported into the nation. Between January and April 2025, the nation’s average imposed tariff rate increased from 2.5% to a projected 27%—representing the highest figure in over a century, dating back to the Smoot–Hawley Tariff Act. Following modifications and diplomatic discussions, the estimated rate was lowered to 18.6% by August 2025. As of July 2025, duties accounted for 5% of federal government income, contrasting with a historical average of 2%.

Utilizing Section 232, Trump elevated tariffs on steel, aluminum, and copper to 50% and instituted a 25% levy on imported automobiles from most nations. Proposed new tariffs targeting pharmaceuticals, semiconductors, and additional industries are currently under consideration. On April 2, 2025, Trump employed unprecedented authority granted by the International Emergency Economic Powers Act (IEEPA) to declare “reciprocal tariffs” on imports from all nations not already facing distinct sanctions. A blanket 10% tariff was implemented on April 5. Further country-specific duties were temporarily halted after the 2025 stock market crash but were ultimately activated on August 7.

The IEEPA tariffs also ignited a trade dispute with Canada and Mexico and intensified the ongoing China–United States trade war. Foundational U.S. tariffs on Chinese products reached a peak of 145%, while Chinese duties on American goods attained 125%. In a temporary ceasefire set to lapse on November 9, the U.S. lowered its tariffs to 30% and China decreased theirs to 10%. Trump also ratified an executive order to remove the de minimis exemption starting August 29, 2025; this provision had previously exempted shipments valued under $800 from tariffs.

Federal courts have determined that the tariffs invoked under the IEEPA are unlawful, as seen in rulings like V.O.S. Selections, Inc. v. United States; nevertheless, the tariffs continue to be enforced while the litigation is under appeal. These legal contests do not pertain to tariffs authorized under Section 232 or Section 301.

The Trump administration contends that its tariff strategy will stimulate domestic industrial production, safeguard national security, and act as a replacement for income taxes. The administration perceives trade deficits as intrinsically damaging, a position economists have denounced as a mistaken interpretation of trade. Even though Trump has stated that foreign nations bear the cost of his tariffs, U.S. tariffs are actually fees paid by American consumers and companies when importing foreign products. These tariffs were a factor in lowered GDP growth forecasts issued by the US Federal Reserve, the OECD, and the World Bank.

• Background:

Since the 1980s, Trump has promoted import tariffs as an instrument to control trade and counter foreign countries that he asserts have exploited Americans. During his campaigns for the U.S. presidency, Trump committed to employing tariffs to accomplish a broad spectrum of objectives, such as averting war, diminishing trade deficits, enhancing border security, and funding childcare.

• Tariffs in the first Trump administration:

In 2018, Trump instituted tariffs on steel and aluminum imports, which led to increased prices for American consumers. By December 2021, the price for one metric ton of hot-rolled band steel was $1,855 in the U.S., versus $646 in China and $1,031 in Europe. The World Trade Organization (WTO), which regulates international trade, determined that this implementation broke global trade regulations. Although Trump and Joe Biden later repealed a portion of these tariffs, the majority were still active at the commencement of Trump’s second term.

Trump also initiated the China–United States trade war, which applied 20% tariffs to 60% of the trade between the two nations and was frequently described as a failure for the United States.

In May 2019, Trump utilized threats of tariffs as high as 25% on Mexico to broker a deal that expanded his “Remain in Mexico” policy and involved the deployment of Mexican soldiers to assist with curbing illegal immigration. The Mexican government deployed almost 15,000 troops to its border with the U.S. and 6,500 troops to its border with Guatemala.

In 2020, the U.S., Mexico, and Canada renegotiated NAFTA into the United States–Mexico–Canada Agreement (USMCA) and reaffirmed their commitment to 0% tariffs on most goods traded among them. Merely five weeks after the USMCA became active, Trump used a national security exemption to enforce a 10% tariff on Canadian aluminum, alleging it was inundating the U.S. market. He rescinded the tariff one month later, just three hours before the 29th Canadian Ministry was scheduled to enact retaliatory measures.

• Tariffs plans during Trump’s 2024 presidential campaign:

Throughout his 2024 presidential campaign, Trump promised even more substantial tariffs than those from his first term, including 60% on China, 100% on Mexico, and 20% on all other countries. He also suggested using tariffs to punish U.S. firms that outsourced production, such as proposing a 200% tariff on John Deere.

Trump additionally floated the idea of substituting income taxes with tariff income—a concept economists from the Tax Foundation declared “mathematically impossible.” A group of 23 Nobel Prize-winning economists signed a letter cautioning that Trump’s strategies, which included high tariffs, would “result in increased prices, bigger deficits, and more inequality.”

On November 5, 2024, soon after the 2024 United States presidential election, Trump conceded that tariffs could cause “some pain” for Americans but asserted that “it will all be worth the price that must be paid.”

Economic Impacts:

1.  Unemployment rate:

Economic analysts predict that tariffs enacted during the Trump administration could elevate the unemployment rate to levels typical of a recession.Because importing companies incur the expense of tariffs, which can increase operational costs, one method for managing expenditures is by reducing employment. Federal statistics show that the manufacturing industry lost a net total of 14,000 jobs in May and June combined. A publication from the Bureau of Labor Statistics notes that hiring at manufacturing plants in May slowed to its most sluggish rate since 2016, in the Barack Obama era, falling even under the rate observed during the COVID-19 pandemic. Manufacturing job openings—a crucial gauge of future hiring—have fallen by approximately 100,000 since the beginning of the Trump presidency. In an associated event, automaker Stellantis declared on April 3rd that it would provisionally lay off 900 workers, naming the President’s tariffs as a factor. Analysis from the Congressional Budget Office calculates that, not including the impact of retaliatory tariffs, the unemployment rate might increase to 4.7% or more by the conclusion of 2025.

2. Tourism industry:

The United States tourism industry is predicted to suffer substantial losses—up to$29 billion—resulting from tariffs, travel prohibitions, inflammatory language, and strict immigration policies enacted during the Trump administration. Research by the World Travel and Tourism Council (WTTC) shows that spending by international visitors in the U.S. is projected to decrease by $12.5 billion this year relative to the previous year.[500] Moreover, Tourism Economics, an Oxford Economics Company, expects an 8.2% decrease in international inbound travel to the U.S. by 2025, with actual losses potentially exceeding this projection. Together, estimates from Tourism Economics ($8.3 billion) and WTTC ($12.5 billion) suggest combined losses of between $25 billion and $29 billion for the U.S. tourism industry this year.

3. Revenues:

Trump’s second-term tariffs produced a record sum of money from customs and excise taxes.By July 2025, tariffs had generated $108 billion in net revenue over the preceding nine months, compared to $392 billion from corporate tax and $3.648 trillion from income tax, and constituted 5% of federal revenue versus 2% historically. Goldman Sachs reported that the incidence of tariffs in May 2025 had been allocated roughly 40% to US consumers, 40% to US businesses, and 20% to foreign exporters.

• Trump Tariffs VS India: In February 2025,Indian Prime Minister Narendra Modi visited the White House to discuss tariffs and progress a deal intended to double two-way trade with the US to $500 billion by 2030. India’s trade-weighted average tariff was 12%, compared to the United States’ 2.2%, prompting Trump to repeatedly call the nation “tariff king” and a “big abuser” of trade relationships.
• The US was India’s biggest export market and assessments predicted that any reciprocal tariff actions would inflict major economic damage on India. An internal Indian assessment calculated that reciprocal tariffs would impact 87% of its total exports to the US, worth $66 billion. India projected increases of 6% to 10% in tariffs on articles such as pearls, mineral fuels, and machinery and thought its pharmaceutical and automotive exports would experience the most significant effect.
• To respond to Trump’s trade issues, in February 2025 India lowered tariffs on motorcycles and whiskey, promised to evaluate other tariffs, and proposed raising US energy and defense equipment imports. The next month, Reuters announced that India was willing to reduce or remove tariffs on 55% of its imports from the US which were then subject to tariffs between 5% and 30%. India cautioned that the offer was dependent on receiving exemption from reciprocal tariffs and stated that decisions were not yet final.
• The US proclaimed a 27% “reciprocal” tariff on Indian goods starting April 9. India indicated that it would engage in discussions with the United States instead of imposing retaliatory tariffs. After the US postponed the tariff, the US Treasury Secretary stated “India would be one of the first trade deals we sign” on April 29, 2025. On July 1, Trump said the two nations were close to an agreement.
• Nonetheless, as of July 30, no agreement had been completed. The US declared a 25% “reciprocal tariff” on Indian goods would start August 1 and warned of an extra, unspecified punishment in reaction to India’s acquisitions of Russian oil. India stated it would persist in buying Russian oil, and on August 4, Trump said he would “substantially” increase tariffs on Indian goods. On July 6, Trump commanded a 25% “secondary tariff” on India as a penalty for its trade with Russia, bringing total base tariffs to 50% commencing August 27.

Concludery Statement:

President Trump’s second-term tariff policy represents a profound and aggressive shift in U.S. trade relations, characterized by a dramatic increase in average tariff rates to levels not seen in a century. This strategy, justified by the administration as a means to boost domestic manufacturing, enhance national security, and generate alternative government revenue, has instead triggered global trade conflicts and widespread economic criticism.

The immediate consequences have been significant. Economists uniformly note that the financial burden falls primarily on U.S. consumers and businesses, not foreign entities, contradicting the administration’s claims. Key impacts include rising business costs, job losses in manufacturing, projected increases in unemployment, and severe damage to the tourism industry. While tariff revenue has increased, it remains a minor component of the federal budget and is far from capable of replacing income tax, as once suggested.

Legally, the use of emergency powers to enact tariffs has been ruled illegal, though the policies remain in effect during appeals. The approach has severely strained relations with key partners, escalating into a full-blown trade war with China and creating friction with allies like Canada, Mexico, and India.

In conclusion, while fulfilling campaign promises, these protectionist policies have fostered global economic instability, incurred significant costs for the American economy, and challenged international legal norms, with their long-term effectiveness remaining highly contentious and economically doubtful.