Donald Trump’s second term was meant to be a return to economic nationalism. He promised to revive his America First agenda and put U.S. manufacturing back at the centre of the economy. Central to this plan was a sweeping tariff regime. The goal was to punish trade partners, bring production home, and shift the global balance of power in America’s favour.
What has unfolded is very different. The tariff war is harming the U.S. economy, straining its alliances, and failing to achieve the promised gains. The country is now facing higher inflation and slower growth.
Trump often claims that foreign countries are paying for the tariffs. In reality, most of the cost is falling on Americans themselves. Goldman Sachs estimates that the United States will bear about 75 per cent of the tariff burden. This means it is U.S. consumers and businesses that are absorbing the impact.
Who Is Paying the Bill?
American manufacturers are already under pressure from high borrowing costs. The new tariffs have added billions to their expenses for imported components. These extra costs are reaching the consumer. Goldman Sachs projects that households will pay an extra 5,200 dollars each year because of price increases. Inflation, which had eased for a time, is climbing again as the Consumer Price Index responds to the tariff shock.
At the moment, U.S. businesses are covering much of the tariff cost. They have warned, however, that they cannot continue this for long without risking closure. By autumn, as the latest round of tariffs takes effect, Goldman Sachs expects that 67 per cent of the cost will fall on consumers, 8 per cent on businesses, and 25 per cent on foreign exporters.
The average U.S. tariff rate now stands at 17 per cent, a level last seen in the Great Depression. For an economy that depends on global supply chains, this is a serious warning sign. From automobiles to pharmaceuticals, many industries need foreign-made inputs. Tariffs on these goods do not create new jobs in the United States. They raise costs, reduce profits, and sometimes push production overseas.
The Reality of Manufacturing
The evidence shows that manufacturing is not returning to states like Ohio or Michigan. Labour costs there remain too high. Instead, production is moving to countries such as Vietnam, Thailand, and India. These shifts create new manufacturing hubs abroad, far from the reshoring that Trump had promised.
Trump believes tariffs will fill the U.S. Treasury and allow him to offer tax cuts. Yet as the cost to consumers grows, his political standing is falling. A YouGov poll now places his approval rating at 41 per cent, with disapproval at 55 per cent.
Tariffs as a Tool for Foreign Policy
Trump has used tariffs to apply pressure on foreign governments in ways that go beyond trade. The reaction has been strong. Spain cancelled its order for F-35 fighter jets after a dispute over defence talks. Switzerland froze deliveries of aircraft and business jets to the United States after facing a 39 per cent tariff. Brazil is preparing countermeasures in response to steep duties on steel and agricultural exports.
The European Union and Japan have resisted Washington’s pressure. Meanwhile, the U.S. still imports heavily from China. Many goods from Vietnam and Thailand also contain Chinese-made parts. Rather than reducing America’s dependence on Beijing, the policy is encouraging Asian economies to diversify their trade relationships in other directions.
India’s Refusal to Bend
India offers a clear example of how this strategy can fail. Trump targeted New Delhi with 50 per cent tariffs because it continued to buy discounted Russian oil. The move was meant to coerce India into changing its policy. It did not work.
Instead, India has strengthened ties with Russia, opened new channels with China, deepened trade talks with Europe, and made it clear that tariff threats will not dictate its foreign policy. Indian exporters in textiles, jewellery, pharmaceuticals, and electronics are now turning to other markets. Experts in the United States warn that Trump’s approach could push India closer to the BRICS group and weaken the 190 billion dollars in annual trade between the two countries.
Political and Economic Consequences
Trump once promoted tariffs as a political victory and a sign of economic independence. That image is fading. Inflation is eroding household budgets. Manufacturers warn of layoffs. Public frustration is growing.
In April, Amazon planned to display a “tariff cost” indicator on product pages. This would have made it clear to shoppers that they were paying a hidden tax. Reports suggest the White House stepped in to block the move, and Trump himself called Jeff Bezos. The feature was abandoned, but the story made headlines.
The Final Outcome
The tariff war was meant to show strength. Instead, it is seen by many as a sign of poor economic management. Allies such as Canada, Spain, and Switzerland are distancing themselves. Emerging economies like India are more assertive in defending their policies. China, far from being weakened, has been able to adapt and in some areas benefit.
For Washington, this policy is proving costly not only in terms of money but also in terms of credibility.
Post a Comment