Whats All This Faff About Trump's Tariffs?

  I am sure we've all heard recently how Trump has imposed a lot of tariffs on different countries for the goods they import/export to and from the USA. But what does it really mean, and what are the challenges it brings to countries? I am here to explain. 

After taking the office on the 25th of January, 2025, President Donald J. Trump has sanctioned a series of steep tariffs, increasing the USA tariff rate from 2.5% to 27%- the highest it has been in over a century¹. He has also escalated an ongoing trade war with China, another trade giant. 

What is the benefit for increasing tariffs? 

These kind of tariffs are known as protective tariffs. Protective tariffs are enacted with an aim to protect a domestic industry. This is achieved quite simply- by increasing tariffs on imported goods, these products would cost more than their counterparts which were produced in the USA- hence encouraging higher sales of domestic products, boosting the economy. Let's take the example of 'Product A'. Product A was originally imported from a foreign country, and its price, after tariffs, was $2, and that same product, when produced in the USA, costed $5. Now, by highly increasing tariffs, the price of Product A rose to $6. This now meant that Americans would choose to by the Product A produced in America by American firms- adding to the national economy, whereas negatively impacting the foreign country as it now has to pay more. Therefore, Trump has introduced a minimum of 10% in tariffs on goods from all around the world, with it going as high as 50% for some countries. For China, it is a whole another story- a whopping 145% on Chinese goods, and China has hit back with a 125% tax on US goods. Trump also went to the extent of revoking the de minimis exemption for China, Canada and Mexico. This is an exemption that waives standard custom procedures for low value products. The threshold for this went up from $200 to $800 in 2016- boosting imports in the US by 1000% by 2023. However, by Trump revoking it, this now meant that these countries would now need to pay tax even on low value goods. Eventually this was restored back in February to avoid an overburden on US Customs officers. We know Trump won't give up so easily- before you know it, this was again revoked, this time only for China and Hong Kong, from May 2nd. This has had a profound impact on Chinese retail companies like Shein and Temu, who are infamously known for their extremely low value clothes and accessories. Now, they will have to pay 125% tax on even the cheapest of goods, hence leading to an hike in prices of goods from Temu and Shein.  

But... what has it actually brought to the US + World Economy?

It hasn't exactly been the 'utopia' Trump imagined it to be. Though he did this to boost sales of domestically produced goods to help American factories and companies- but there simply aren't that many American alternatives. As we all know, the USA is a HIC, and most HICs are heavily reliant on the tertiary sector- meaning that there aren't that many manufacturing/extracting businesses left- so it can be hard to buy some domestically produced goods. This meant that Americans would know have to pay more to buy goods from other countries like they did before- leading to an increased expenditure and therefore also resulting in a drop in US consumer sentiment. There was also a drastic fall in many stock markets- the Nasdaq Composite even fell by 5.97%, the largest point loss in its history. This is because Trump's tariffs affected many companies, increasing their import/export costs. This leaves them with two options- either they face these costs w/o changing the price of their products, leading to lower profit margins or even losses; or they increase their prices, possibly resulting in a fall in sales- again affecting profits. This uncertainty head to many investors selling their shares of numerous companies- hence resulting in a stock market fall. 

Things haven't been that great for the US economy as well. Before Trump's inauguration the US GDP rose by 2.8% in 2024- now the OECD projected a decline to 1.6% in 2026. There has also been an increased concern by the Federal Reserve of there being inflation. The US dollar value decreased massively compared to other currencies as well. Grocery prices are expected to rise, should Trump impose 25% tariffs on Mexican and Canadian goods- 2/3s of the US' vegetable imports come from Mexico. Things aren't looking well for Americans- their purchasing power is expected to fall by $1,200, according to Budget Lab at Yale University. 

For China, the removal of the de minimis exemption is said to lower export growth by 1.3% and GDP growth by 0.2%. We can clearly see why- ~50% of de minimis exports come from China. In response to Trump's vehicle tariffs, some automobile companies such as Audi, Jaguar, etc. have even suspended their exports to the US. One of the worst affected countries is Bangladesh- it is the 2nd largest exporter of textile in the world, and holds 8% of the US textile market. Due to a fall in the amount of textile sales it can be a great blow to their GDP as a result of it contributing to 80% of Bangladesh's GDP. 

In conclusion, Trump's tariffs have not only severely impacted many countries, but has even been a blow to the country it was said to have benefitted. It has lead to ongoing trade wars with China, Mexico, etc. And this may just be the beginning- who know what else Trump has up his sleeve- I will definitely report back in a few months- possibly when things may be quite escalated- to give another deep analysis on how it has shaken the world. Until then, make sure to keep busy reading my other upcoming articles!

Vihaan Zawar 

Sources: 

1= https://en.wikipedia.org/wiki/Tariffs_in_the_second_Trump_administration

NOTE: facts and figures have all been taken from multiple sources.