Tariffs and Trade Wars

On April 2, 2025, President Donald J. Trump initiated sweeping tariffs against every trading partner of the USA. This did play well with the nationalists, America First Republicans, in the USA. At this point, they have either worked or not. We are closing at the end of the second quarter of 2025. That makes it a good time to begin the review of what is happening in the USA. We end this quarter by looking at tariffs, trade wars, how they work, and who benefits. We review eight articles on the topic from various accredited sources.

Tariffs in 2025: A Look Back

As we look back on the second quarter of 2025, tariffs have taken center stage in U.S. trade policy. In early February, President Trump announced new tariffs on imports from Canada, Mexico, and China. These tariffs ranged from 10% to 25%. They aimed to protect American jobs and boost domestic industries.

Experts quickly weighed in. A fact sheet from the Economic Policy Institute showed that while tariffs could help certain sectors, they would burden American households. The costs of imported goods would rise. People would pay more for everyday items. This could hurt consumers more than it helps producers.

Many articles highlighted the confusion about tariffs. Some economists said tariffs are actually paid by American companies, not foreign countries. These companies then pass the higher costs on to consumers. This means that when tariffs go up, so do prices in stores.

The University of Chicago experts pointed out that tariffs also encourage retaliation from trading partners. For example, after U.S. tariffs on steel, China and Canada responded with their own tariffs on American goods. This often leads to a trade war where everyone loses.

Many articles discussed how tariffs might not fix the U.S. trade deficit. A fact sheet noted that neither high nor broad tariffs could change the overall trade balance. They may even reduce American exports, as foreign countries respond with their own taxes.

Overall, the second quarter of 2025 brought intense discussions around tariffs. While they intended to protect American industries, the side effects became clear. Consumers faced higher prices, and the trade war risks increased. As these policies take shape, the question remains—are tariffs the right solution?

Fact Sheet: President Donald J. Trump declares national emergency to increase our competitive edge, protect our sovereignty, and strengthen our national and economic security

Narrative Summary

On April 2, 2025, President Donald J. Trump declared a national emergency to confront what he termed as unfair foreign trade practices that have endangered the economic stability of the United States. His administration’s newly proposed tariffs, a component of his reciprocal trade agenda, aim to reduce the persistent trade deficits that have eroded the U.S. manufacturing base and compromised national security. Under the International Emergency Economic Powers Act of 1977 (IEEPA), the President announced a uniform 10% tariff on all countries, effective April 5, 2025, with individualized higher tariffs for nations with significant trade deficits, set to take effect on April 9, 2025.

President Trump’s rationale for these actions rests on the assertion that unfair economic policies by trading partners, particularly currency manipulation and non-reciprocal tariffs, have led to the offshoring of American jobs, a decline in domestic manufacturing capabilities, and vulnerability in defense supply chains. He highlighted the dire necessity of boosting U.S. manufacturing output, which has dramatically decreased over decades.

The administration posits that these tariffs will not only level the playing field for U.S. companies but also foster economic growth by encouraging production and job creation domestically. The President’s directives aim to enforce the “Golden Rule” in trade—seeking fair treatment in international markets. By ensuring that trade policies are reciprocal, the Trump administration believes it can restore America’s competitive edge and strengthen its national and economic security.

APA Citation

The White House. (2025, April 2). Fact Sheet: President Donald J. Trump declares national emergency to increase our competitive edge, protect our sovereignty, and strengthen our national and economic security. https://www.euronews.com/business/2025/04/03/heres-why-president-trumps-tariffs-could-benefit-european-consumers

How do tariffs work, and who will they impact? UChicago experts explain.

Narrative Summary

On April 2, 2025, the University of Chicago featured insights from experts regarding the recently announced tariffs by the Trump administration, including a sweeping 25% tariff on all foreign-made vehicles. The Q&A session engaged scholars from various disciplines—Robert Gulotty, Steven Durlauf, and Rodrigo Adão—who elaborated on the implications of these policies for U.S. consumers and the economy at large.

The discussion commenced with an explanation of tariffs, highlighting them as federal taxes on goods imported into the U.S., which can serve three primary purposes: generating government revenue, redistributing income from consumers to domestic producers, and strategically influencing global market prices. Notably, the experts emphasized that the financial burden of tariffs primarily falls on U.S. consumers and domestic firms rather than the foreign producers, a trend observed during previous trade wars.

The narrative continued with a focus on the impacts of these tariffs on various sectors, particularly how vital imports—like vegetables from Mexico—would lead to increased costs for American consumers. The experts articulated that, while tariffs are often justified as protective measures for U.S. jobs, they can have adverse ripple effects across the economy, potentially harming more jobs than they protect in ancillary sectors reliant on imports.

The discourse further highlighted the challenges tariffs pose to international relations, particularly with neighboring countries where integration is high, such as in the automotive supply chain. There was a consensus that the fluctuating and unpredictable nature of these tariffs creates significant economic uncertainty, complicating business forecasting and planning.

APA Citation

Lee, T. (2025, April 2). How do tariffs work, and who will they impact? UChicago experts explain. University of Chicago. https://news.uchicago.edu/story/how-do-tariffs-work-and-who-will-they-impact-uchicago-experts-explain

5 things to know about tariffs and how they work.

Narrative Summary

In an article published by PBS News on April 3, 2025, author Paul Wiseman details essential information regarding tariffs, particularly in light of recent policies proposed by the Trump administration. As tariffs become a focal point of economic discourse, the article outlines their fundamental characteristics, purposes, and implications for both domestic and international trade.

Tariffs are defined as taxes placed on imports, typically levied as a percentage of the cost paid to foreign sellers. The U.S. government, through Customs and Border Protection, collects these tariffs at entry points across the country. As the article notes, the rates can vary significantly—for example, 2.5% on passenger cars and 6% on golf shoes—and typically apply to foreign goods to protect domestic producers and generate federal revenue.

Contrary to President Trump’s assertions that tariffs would primarily affect foreign countries, the article emphasizes that American importers bear these costs, which are often passed on to consumers in the form of higher prices. The economic damage inflicted by U.S. tariffs has primarily affected other countries, as vendors may need to adjust their pricing to maintain market access in the U.S. Tariffs have also raised concerns about retaliatory actions from affected nations, leading to broader economic repercussions.

While President Trump promotes tariffs as tools for job creation and trade equity, many economists remain skeptical, arguing that they can lead to higher consumer prices, economic inefficiency, and retaliatory tariffs from trading partners. The piece highlights various studies indicating that tariffs have not raised U.S. employment as expected and have particularly harmed industries dependent on imports, such as agriculture.

The article closes by underscoring how Trump’s protective trade measures have influenced political dynamics, bolstering support in regions heavily impacted by tariff policies, despite the unfavorable economic metrics.

APA Citation

Wiseman, P. (2025, April 3). 5 things to know about tariffs and how they work. PBS News. https://www.pbs.org/newshour/economy/5-things-to-know-about-tariffs-and-how-they-work

The basics of tariffs and trade barriers.

Narrative Summary

In the article “The Basics of Tariffs and Trade Barriers,” published by Investopedia on February 2, 2025, author Brent Radcliffe provides a comprehensive overview of tariffs, their functions, and their implications in international trade. Tariffs are defined as taxes imposed on imported goods, which effectively increase their prices relative to domestic products. This mechanism is often employed as a protectionist strategy to bolster domestic industries by incentivizing consumers to purchase local products.

The article highlights the various types of tariffs and barriers, including specific tariffs, which are fixed fees per unit, and ad valorem tariffs, calculated as a percentage of the good’s value. Tariffs are collected by customs authorities, and although they can generate government revenue, the burden ultimately falls on consumers, who face higher prices for imported goods.

Radcliffe outlines several reasons for imposing tariffs, including protecting domestic employment, supporting infant industries, and enforcing national security. He emphasizes that while tariffs may offer short-term benefits to specific sectors, they can lead to increased prices overall and less market efficiency as domestic producers become less competitive.

The author also touches on the political implications of tariffs, noting how they can influence voting behavior among different labor sectors. The trade dynamics highlighted in the article illustrate the complex and often contentious nature of tariffs while underscoring their significant impact on both domestic and global economies.

APA Citation

Radcliffe, B. (2025, February 2). The basics of tariffs and trade barriers. Investopedia. https://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp

How new U.S. tariffs could create winners: Companies positioned to benefit from trade policies.

Narrative Summary

On March 4, 2025, YCharts published an analysis discussing the potential impacts of newly announced U.S. tariffs on imports from Canada, Mexico, and China, highlighting how these tariffs could create advantageous opportunities for domestic companies. While tariffs typically result in increased costs for businesses dependent on foreign imports, they can also foster growth for U.S.-based companies by reducing foreign competition and benefiting from government incentives.

The article identifies key sectors likely to benefit from these tariffs:

1. Domestic Manufacturing & Industrials: Companies like Caterpillar, Deere & Co., and U.S. steel producers such as Nucor and Steel Dynamics are expected to gain from higher domestic demand as imported goods become more expensive.
2. Energy & Domestic Resource Production: U.S. oil and natural gas producers—including ExxonMobil and Chevron—could find an advantage as tariffs on imported energy make their products more competitive.
3. Agriculture & Food Production: Producers such as Archer Daniels Midland and Tyson Foods stand to benefit if tariffs on imported agricultural products elevate domestic prices, subsequently boosting demand for their goods.
4. Semiconductor & Technology Firms: Companies like Intel and Micron Technology, that focus on reshoring manufacturing, may gain market share as tariffs disrupt global supply chains.
5. Defense & Aerospace Industry: Major defense contractors like Lockheed Martin and Boeing are likely to benefit from increased government contracts favored toward U.S. production.

Furthermore, the article discusses investment strategies for financial professionals based on these tariff effects, recommending sector-focused ETFs to capitalize on potential growth areas. Monitoring GDP growth, market volatility, and inflation trends are emphasized as critical to navigating the changing economic climate influenced by tariffs.

APA Citation

YCharts. (2025, March 4). How new U.S. tariffs could create winners: Companies positioned to benefit from trade policies. https://get.ycharts.com/resources/blog/how-new-u-s-tariffs-could-create-winners-companies-positioned-to-benefit-from-trade-policies/

Tariffs—Everything you need to know but were afraid to ask.

Narrative Summary

The fact sheet “Tariffs—Everything You Need to Know but Were Afraid to Ask,” authored by Adam S. Hersh and Josh Bivens and published by the Economic Policy Institute on February 10, 2025, provides comprehensive insights into the implications and effectiveness of tariffs as an economic tool. The document explores various dimensions of tariffs, including their potential to support specific goals in policymaking, the economic burden they impose, and their role as a tool within broader industrial policy frameworks.

The authors argue that while tariffs can offer protection to certain domestic sectors and are beneficial for targeting unfair competition, they are insufficient for fixing the U.S. trade deficit or rebuilding manufacturing employment. Tariffs tend to lead to retaliatory measures from trading partners, ultimately harming U.S. exports. Additionally, they emphasize that American households bear most of the burden of tariffs through increased prices for both imported and domestic competing goods.

The sheet also discusses the misconception that tariffs can serve as a significant revenue source for government spending. Instead, tariffs are highlighted as regressive compared to progressive taxes and may not provide the necessary funds to replace lost revenue from other sources, such as income taxes.

Further, the authors clarify that tying tariffs to value-added taxes (VATs) used by other countries is a misunderstanding since VATs are structured to be neutral with respect to trade. VATs do not penalize imports nor subsidize exports, as they are designed to maintain equitable tax treatment across countries.

Overall, the fact sheet provides critical analysis and data to elucidate the complexities surrounding tariffs and their impact on the economy.

APA Citation

Hersh, A. S., & Bivens, J. (2025, February 10). Tariffs—Everything you need to know but were afraid to ask. Economic Policy Institute. https://www.epi.org/publication/tariffs-everything-you-need-to-know-but-were-afraid-to-ask/

Who benefits from trade wars?

Narrative Summary

In “Who Benefits from Trade Wars?” published in Intereconomics (2018), authors Wolfgang Lechthaler and Mariya Mileva explore the paradoxical rise of protectionism despite the long-standing benefits of international trade emphasized by economists. The authors argue that while aggregate economic outcomes may decline due to tariffs—ultimately harming GDP—certain groups, particularly unskilled workers in import-competing sectors, may benefit temporarily and therefore support protectionist policies.

The article outlines how tariffs function as both protective and revenue-generating tools. By raising import prices, tariffs can shift economic activities from sectors reliant on exports to those focused on domestic production, impacting skilled and unskilled workers differently. Unskilled workers in import-competing sectors may see short-term gains from higher tariffs, while skilled laborers, particularly in exporting industries, face declines in demand and wage suppression.

Lechthaler and Mileva highlight that the dynamics of trade wars exacerbate these inequalities, demonstrating that while trade wars typically harm all parties involved at an aggregate level, specific worker groups can still find their preferences aligning with protectionist measures. The authors assert that unskilled workers, who thrive in import-competing sectors, significantly advocate for increased tariffs despite potential long-term detriments to the overall economy.

The findings suggest that the political feasibility of tariffs is influenced by the economic reallocation effects on specific labor sectors, emphasizing the challenges policymakers face in balancing short-term political support against long-term economic health.

APA Citation

Lechthaler, W., & Mileva, M. (2018). Who benefits from trade wars? Intereconomics, 53(1), 22–26. https://doi.org/10.1007/s10272-018-0714-y

Tariffs: What are they, who pays for them and who do they benefit?

Narrative Summary

On October 1, 2024, USC Dornsife featured an article by Darrin S. Joy that delves into the intricate topic of tariffs as explained by Monica Morlacco, an economics professor at USC. The article provides an insightful overview of tariffs, addressing their functions, impacts, and the ongoing debates surrounding their usage in contemporary trade policy.

Morlacco clarifies that a tariff is a tax levied on goods when they cross national borders, traditionally aimed at generating revenue for the government or protecting domestic industries from foreign competition. While the United States has used tariffs since its founding, their prominence as a revenue source has diminished significantly over the years.

The expert notes that when the U.S. imposes a tariff, consumers generally face increased prices for imported goods. This situation simultaneously benefits domestic producers who are shielded from foreign competition. The designations of “large” and “small” economies are pivotal; a large economy like the U.S. can influence global prices, potentially leading to a reduction in import costs following an imposed tariff, known as a “terms of trade gain.”

The article emphasizes potential negative consequences, including retaliatory tariffs from other countries, which further complicate trade relations and may escalate into broader economic tensions. Morlacco recounts the 2018 trade war as a case study where U.S. tariffs prompted retaliatory actions that adversely impacted U.S. exports and heightened economic uncertainty.

APA Citation

Joy, D. S. (2024, October 1). Tariffs: What are they, who pays for them and who do they benefit? USC Dornsife. https://dornsife.usc.edu/news/stories/tariffs-explained-by-economics-professor-trade-expert/