Graphics: Who's paying the price of Trump's trade war?

The U.S. has announced a 10-percent tariff on Chinese imports, citing concerns over fentanyl and other issues, while China has responded with countermeasures, filing a case with the World Trade Organization (WTO) and imposing retaliatory tariffs on American goods.

China's Ministry of Commerce has condemned the U.S. move as a violation of WTO rules and an act of unilateral trade protectionism. In retaliation, the State Council Tariff Commission is set to implement new duties starting February 10, including a 15-percent tariff on coal and liquefied natural gas and a 10-percent tariff on crude oil, agricultural machinery, large-displacement vehicles, and pickup trucks.

China's exports to the U.S. remain substantial despite growing trade barriers. In 2024, the total exports reached approximately $524.7 billion, with electrical machinery, textiles, base metals, plastics, and transport equipment among the top categories. These industries are expected to take the biggest hit from the renewed tariff dispute.

Economic impact of tariffs

Multiple academic studies and government reports suggest that tariffs have largely hurt the U.S. economy. Research finds that the Trump-Biden tariff policies have driven up costs for consumers and businesses, reduced economic output and employment, and led to broader economic strain.

A study by the Tax Foundation estimates that these tariffs could reduce long-term U.S. GDP by 0.2 percent, decrease capital investment by 0.1 percent, and eliminate 142,000 jobs. Meanwhile, the International Monetary Fund projected that repealing the 2018-2019 tariffs could boost U.S. output by 4 percent over three years.

Why is Trump pushing for more tariffs?

Trump argues that tariffs will boost federal revenue, stating, "We will take in hundreds of billions of dollars into our treasury and use that money to benefit the American citizens." He also claims tariffs will enhance American manufacturers' competitiveness and create jobs. However, most economists dispute these claims, warning that tariffs function as a hidden tax on American consumers and businesses.

Additionally, Trump sees tariffs as a powerful negotiation tool. For example, on January 26, after Colombian President Gustavo Petro refused to allow U.S. military planes carrying deportees to land in Colombia, Trump announced a 25-percent tariff on Colombian goods. He later rescinded the decision after reaching an agreement with Colombia.

It's important to note that while tariffs increases federal revenue, the same tax burden is imposed on U.S. consumers. Implementing consumption taxes is more challenging than imposing tariffs, which may explain Trump's preference for tariffs. However, the positive impact of tariffs on federal revenue may diminish over time, especially if higher tariffs suppress import volumes, thereby reducing the tax base.