Impact of US tariff abuse on its own economy is enormous

Editor's note: Su Qingyi is a director and research fellow at the International Trade Division of the Institute of World Economics and Politics at Chinese Academy of Social Sciences. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity. 

The US government, pursuing an "America First" foreign policy, particularly in foreign trade, has introduced a series of aggressive tariff measures, including but not limited to tariffs on fentanyl-related products, Section 232 tariffs, and "reciprocal tariffs." While these seemingly tough policies may deliver short-term political gains to certain interest groups, they are likely to inflict serious damage on the US economy over the long term.

These policies will drag US economic growth. Economists estimate that if the US were to impose "reciprocal tariffs," its real GDP could cumulatively decline by as much as 3.84 percent over the next three to five years. Based on US GDP levels in 2024, this would amount to a total loss of approximately $1.07 trillion in GDP. Therefore, the new tariff measures will inevitably slow the pace of US economic growth. If the affected countries retaliate, the economic losses could become even more pronounced.

These policies will undermine the competitiveness of US companies. US companies are vital players in global supply chains, with many relying on imported raw materials and components to maintain their cost advantages in production and operations. Rising import costs caused by high tariffs compress profit margins for these companies, forcing them to either raise prices or cut expenses. Price hikes may weaken consumer purchasing power and hurt sales, while cost-reduction measures such as layoffs jeopardize employee welfare and social stability. More importantly, over the long term, this will weaken the competitiveness of US companies in the international market.

These policies will increase the burden on consumers. For ordinary US residents, the most immediate consequence of tariffs is higher prices. A large share of everyday goods in the US is sourced globally, particularly electronics, clothing, footwear, and other necessities from China. Therefore, as tariffs drive up the prices of these goods, household budgets will be strained. Sweeping tariffs would significantly raise annual expenditures for US consumers, placing a disproportionate burden on low- and middle-income groups. In the meantime, inflation may also intensify, further eroding the real incomes of residents. For instance, the Tax Foundation notes that US President Donald Trump's tariff imposition on all trading partners would damage the US economy through two primary channels: first, by raising prices, which depresses corporate wages and profits while pushing up consumer prices; and second, through the appreciation of the dollar, which would make US exports less appealing, thereby reducing incomes for American workers and enterprises.

These policies will destabilize the labor market. Although Trump claimed that tariff hikes would protect domestic employment, the actual effects often prove counterproductive. On the one hand, as previously discussed, rising manufacturing costs have forced companies to readjust their employment strategies and even shut down some of their factories. On the other hand, the service sector, as a cornerstone of the US economy, is not immune either. For example, the retail industry could experience declining foot traffic and sales, thus threatening the job stability of shop assistants and other related positions. Even more critically, sectors such as agriculture face the risk of restricted access to export markets because other countries are highly likely to impose punitive tariffs on US agricultural products and other primary products in retaliation. This would deal a heavy blow to workers dependent on these industries.

In conclusion, although the US seeks to achieve "fair trade" through additional tariffs, in reality, these radical measures are likely to backfire and constrain its own economic development. In pursuing the "America First" agenda, the US government should weigh the pros and cons more cautiously and seek more prudent and sustainable domestic and international policies.