Trump Tariffs: Bane or Boon to the USA?

Frequently mentioned in the media is the concept of a “Trump tariff;” a rallying cry against conservative economic policy. A quick Google search yields result after result that speaks against these tariffs, painting them as entirely detrimental to the United States economy in the long run. Many make a case that the policies are geared only to support the ultra-wealthy, and that the average citizen pays the price for the brunt of these tariffs. On the other side of the debate, we have Trump’s claim that the tariffs will protect American jobs and manufacturing, as well as reduce the trade deficit. When it comes to the jobs, tariffs make it less attractive to move them offshore to cheaper nations. For manufacturing, the same principle applies. Finally, the trade deficit is somewhat amended by tariffs, as foreign manufacturers must, in theory, lower prices to remain equally competitive in light of a tariff. If foreign manufacturers refuse to cut prices or accept lower margins, local demand should drop for elastic or highly competitive goods, thanks to the higher price tag. Of course, foreign nations may simply attempt to retaliate in kind instead of capitulating. I will address that concern later.

So, intentions and goals aside, what exactly are the “Trump tariffs,” in particular? It goes without saying that these monetary tools have existed long before the contentious president. They have indeed been used, albeit with varying outcomes, for a very long time. Their implementation now is no surprise–admittedly, though, the international economic environment is a different beast today. Anyhow, if I ask you to envision the President-Elect speaking of China, I have no doubt that a vivid picture comes directly to mind. Trump saw a clear contributor to the national trade deficit in cheap Chinese manufacture (a product of exploitative labor practices) and subsequent mass import to the United States. This problem needed a solution.

Thus, he initiated an “America first” economic policy, which centered around deficit reduction. Multilateral trade agreements began to be ousted, in favor of customizable, bilateral terms. Trump then set tariffs on individual items and goods, such as solar panels, washing machines, steel, and aluminum. He also imposed general tariffs on specific nations as well–notably, a 5% tariff across the board for imports from Mexico, set to increase by 5% a month for four months, only to stop when illegal movement across the border came to an end. Notably, these tariffs have been used as leverage creators leading up to bilateral trade agreements. In some cases, the tariffs were used simply to drag stubborn nations to the bargaining table (USTR Phase One). Additionally, he initiated the replacement of NAFTA with the USMCA, an agreement that provides the US with more favorable terms than its predecessor. One portion of the new agreement increased the percentage of automotive parts that must be created, and related manufacturing that must be undertaken, within US borders, from 62.5% to 75% (Trade.Gov). One more tool Trump planned to employ against the referenced problems was the End the Offshoring Act, promised as an objective in his Contract with the American Voter. This act was intended to impose additional tariffs for the purpose of discouraging labor outsourcing (NPR). The act was not passed, but I find it likely to be introduced in the legislative chambers sometime soon, due to the republican control in each.

It can be reasonably inferred that similar policy goals will continue into the following four years. Yet, I need not leave the conversation so vague, as Trump has plainly laid out a few of his upcoming tariff objectives. Once I have detailed those, we should have a clear picture, past and present, of what, exactly, the “Trump tariffs” entail, and why they exist. As of November 25, 2024, Trump stated his tariff goals–an imposition of additional 10% tariffs on China (above any existing), as well as an additional 25% on Mexico and Canada (HK Law). These are planned as vanguards to his second wave of foreign policy, set to take full offensive on inauguration day. The purpose is to create leverage around the issues of illegal immigration and drug smuggling, such that each affected nation will take more serious measures against those issues. Remember, before, how I mentioned that tariffs have been used to influence favorable terms or even to simply initiate a conversation? That is a primary goal moving forward as well. We even see this in the strange case surrounding Greenland as of late. Trump appears inclined to purchase the territory–and has threatened Denmark with severe tariffs should they scoff at the proposal (NBC). Funnily enough, the actual Greenlandic leaders seem fairly open to discussions with Trump, as opposed to the rulers of Denmark.

Typically, said nations do not place much effort into these issues Trump seeks action against, as the primary victim, by a long shot, of illegal immigration and drug trafficking is America. If anything, China and Mexico benefit from the issues, in absence of retributive actions such as tariffs and the like. Income from the drug trade is largely remitted to the source country, and illegal immigrants often send money back home, to family and friends. This boosts buying power in the foreign nations, stimulating their economy.

When it comes to these tariffs, a primary question takes the spotlight: will the proposed tariffs truly result in the cessation of the aforementioned issues, or will other nations simply retaliate to equal measure? Well, historically, tariffs have often worked as intended. For example, when Chinese manufacturers began to dump paper clips, at a loss, into the American market in the ‘90s, the US imposed a 127% tariff on Chinese-made paper clips (Investopedia). This tariff has allowed domestic manufacturers to continue operations and has remained in effect to this day. Another example lies in New Balance, the last sneaker brand to have its entire production process within US borders. They are still protected by a 20% tariff on foreign shoe imports.

As we consider whether countries are likely to comply with demands, rather than simply exchange tit-for-tat tariffs all the way into a trade war, we must look at the net flow of goods and services. The answers will primarily lie in this measure. If we look at Mexico, for instance, they export more to the US than they import from our nation. As a result, tariffs of equal measure are going to have an imbalanced effect. Tariffs imposed by the US will diminish Mexico’s export value by a higher gross amount than retaliatory tariffs, of the same level, from Mexico would decrease the flow of US goods into Mexico. Therefore, Mexico will be hurt worse than the US in gross dollar trade impact. By simple mathematics, a percentage reduction on a higher number will yield a larger drop in gross amount, than one on a lower figure.

Across the board, any nation that exports more to the US than they import from us, will experience a larger gross drop in their trade balance in the presence of mirrored tariffs. Of course, the more vulnerable party may simply impose proportionally higher tariffs in order to create an equal impact to the other side. But, tariffs are not all good for the imposing nation–at a certain point, which varies based on many factors, it becomes a net detriment to the country that enforces them. In the end, all countries that heavily rely on exports to the US are quite vulnerable. They can choose to engage in a trade war, but may easily damage their economy far worse than if they simply complied with the tariff-imposing country’s demands.

So, in the particular cases of Canada, China, and Mexico, should Trump tariffs be expected to bring genuine benefit to the American economy? The value of Trump’s tariffs, as they relate to bringing jobs home and increasing US-based manufacturing are clear. Problems do occur, however, for companies that sell elastic goods and are heavily reliant on products from tariffed countries. They must simply eat the additional costs. It costs them too much to begin sourcing inputs from other nations, and increasing prices (passing tariffs to the consumer) will simply result in demand falling off a cliff. Thus, downsizing must occur and some jobs are lost.

While this is certainly a negative result that does occur, there is another side to that coin. First of all, the average consumer is not harmed by tariffs on these companies, as the cost cannot pass through. Secondly, the companies are vastly incentivized to make the investment to either source from other nations or produce domestically. As this incentive grows across the market, the danger to the tariffed country increases–proving the tariff effective.

In the end, these tariffs can be extremely effective. Certainly, US consumers sometimes pay a cost temporarily, and US-based companies may struggle for a time. Yet, in the end, the likely result is an improvement in the trade balance, and increased bargaining power. Detractors claim that such tariffs will bring detriment either by creating a worsened economy, or an unaffected one alongside deteriorated foreign relations. They don’t believe in the end benefit–they only see the temporary price.

Recall the examples of paper clip and sneaker tariffs. Those longstanding examples remain in place to date, which speaks to their usefulness in the domestic economy. When it comes to the Section 301 tariffs on China in particular, pundits on both sides make various claims as to their usefulness. In the end, actions do speak louder than words–President Biden’s intentional continuation of the tariffs does detract somewhat from the popular negative moniker of “Trump tariff.” If the result of the tariffs was a clear net negative to the United States, as some claim, then we’re left to wonder why the Biden admin chose to continue them.

In the end, the trade deficit with China in particular has shrunk over the past eight years (Statista). After rapid growth since 1985, the volume of imports from China began to consolidate in a horizontal, yet volatile pattern. Meanwhile, the gross value of exports to China continues to rise over time. The writer for Statista references the de minimis exception from tariffs for shipments of less than $800, seemingly painting it as a confounding factor. Said tariff is applicable for one package per buyer per day. So, in reality, the total trade deficit is higher, if those shipments were counted. Yet, there have been de minimis exceptions of varying amounts for dozens of years now, meaning the impact of those shipments should indeed be “de minimis” and have negligible impact on the balance of trade. Also, as these exceptions have been in place for a long time, they influence past measures as well as today’s–meaning that a noted decrease over years in the trade deficit is still a decrease regardless of the de minimis exception. This is akin to cancelling out a factor on both sides of an equation.

There are negative externalities of tariffs. Businesses that are highly reliant on Chinese goods face increased materials costs, forcing them to either raise prices or cut labor. That is, unless they spend the time and effort to switch suppliers–which is an intended outcome of the tariffs. If labor is cut, that means less jobs stateside, and if prices are raised, that obviously impacts the American consumer. Nonetheless, in China’s case, retaliatory tariffs have not significantly impacted the balance of trade in their favor. As a result, externalities aside, the tariffs accomplish the intended goal of reducing reliance on China and creating leverage to push for things like IP protection, workers’ rights, and more. As time goes by, and China accedes to more US demands, the benefits of tariffs will become more clear. Still, optimal clarity or not, the actions of our government, which knows far more about the situation than us, speak volumes.

I have primarily addressed China here, as they have, by far, the most leverage and power to have a tit-for-tat economic exchange with the US. Mexico and Canada do not hold the same bargaining power–political rhetoric of each nation’s leaders aside, they must either face the pitfalls of the upcoming tariffs or comply with US demands regarding immigration and drug trade. Leaders of the two countries seem to enjoy making inane public comments in order to appear strong in the media. Our President is also perfectly capable of making questionable comments, but the difference lies in the power he has to back them up. Behind the scenes, foreign leaders are scrambling. The difference in media discussion of China tariffs versus Canada tariffs reveals the truth about the bargaining power measure: it's often said that Canada would struggle in the face of the threatened tariffs, but that China would simply retaliate and harm the US economy. This is because most indeed see China to have far more leverage than, for example, Canada or Mexico–which, in my mind, is an astute observation. Yet, I believe the talking heads go too far in the assumption that China has more leverage than the United States.

All in all, we can expect a rollercoaster in international politics over the next four years. Already, tariffs have been threatened, and the threats have already yielded discussions on various issues. Trump has said that, if Canada can’t handle the tariffs, they should become the 51st state. Additionally, he says that he will work to rename the Gulf of Mexico to a more appropriate name: the Gulf of America. Brazen statements such as that are clearly designed to showcase the leverage we hold. Finally, he wants to buy Greenland and may impose tariffs on Denmark until they agree to sell it. Lots of entirely unexpected propositions, but I’m here for it.

No matter what ultimately comes to pass in foreign policy, it is certain that America is back to a strong-arming phase. There are few realities, I think, in which we don’t simply get what we want from the world, at least for the next few years. Some nations have comparatively more bargaining power than others, but we continue to have the most, and that reality is truly quite static. In the past, the obstacle was our own government, when it comes to Presidents’ ability to do what they wanted. Other nations haven’t held equivalent power in a long time–except the indirect power they held through sympathetic wings of the US government. Now that all branches are essentially unified, I am curious what will be accomplished.

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Works Cited

International Trade Administration. “USMCA Auto Report.” Www.trade.gov, www.trade.gov/usmca-auto-report.

Kelly, Amita, and Barbara Sprunt. “Here Is What Donald Trump Wants to Do in His First 100 Days.” NPR.org, 9 Nov. 2016, www.npr.org/2016/11/09/501451368/here-is-what-donald-trump-wants-to-do-in-his-first-100-days.

Rajvanshi, Astha. “Europe Pushes Back against Trump over Greenland Military Threat.” NBC News, 8 Jan. 2025, www.nbcnews.com/news/world/europe-pushes-back-trump-greenland-military-threat-rcna186744.

Rasure, Erika. “Some Products That Benefit from Protective Tariffs.” Investopedia, 30 Oct. 2024, www.investopedia.com/ask/answers/051315/what-are-examples-products-and-companies-rely-protective-tariffs-survive.asp.

Richter, Felix. “Infographic: A Longterm View on U.S. Trade with China.” Statista Infographics, 6 Feb. 2020, www.statista.com/chart/17982/us-trade-in-goods-with-china-since-1985/.

Tabor, Peter. “President-Elect Trump Announces Tariff Plans for Largest U.S. Trading Partners | Insights | Holland & Knight.” Hklaw.com, 2024, www.hklaw.com/en/insights/publications/2024/12/president-elect-trump-announces-tariff-plans.

United States Trade Representative. “Phase One | United States Trade Representative.” Ustr.gov, 2020, ustr.gov/phase-one.

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