How new tariffs cripple U.S.' economy

Editor's note: Thomas O. Falk, a special commentator on current affairs for CGTN, is a London-based political analyst and commentator. He holds a Master of Arts in international relations from the University of Birmingham and specializes in U.S. affairs. The article reflects the author's opinions and not necessarily the views of CGTN.

The U.S. economy, long the engine of global prosperity, has faltered. The Department of Commerce's latest figures disclose a contraction of 0.3 percent in the first quarter of 2025 – a jolting reversal after years of expansion. This is no mere statistical quirk. It signals deeper malaise, rooted in a policy choice that has cleaved opinion amongst economists and policymakers: tariffs. Far from the genius idea they were promised to be according to Donald Trump, these levies are proving a millstone, dragging down businesses and living standards, whilst stoking a fire of public discontent that may yet engulf the Trump administration.

Conceived as a shield for American industries against foreign rivals, Trump's tariff measures are quickly morphing into a tax on the very enterprises they aimed to safeguard. Manufacturers dependent on imported components face a stark reality. A 10 percent tariff on inputs inflates production costs, gnawing at profit margins and compelling grim choices: hike prices, slash expenses, or both. The consequence is a freeze on investment, as firms, peering into an uncertain horizon, shelve expansion plans and batten down the hatches.

Consider the automotive sector, a linchpin of American industry. Vehicles are not forged in splendid isolation; they emerge from intricate global supply chains, with parts sourced from Mexico, Canada, and China. A 10 percent tariff disrupts this delicate machinery. Carmakers must either swallow the cost, eroding profitability, or pass it on to buyers, risking a slump in sales. Neither path is tenable. Suppliers, sensing weaker demand, trim output and shed workers. Dealerships, hit by dwindling footfall, do likewise. In fact, the tariffs could strip the industry of up to 700,000 jobs – a figure that lays bare the scale of the peril.

Nowhere is this damage more visible than in America's heartland, where small and midsize manufacturers operate on razor-thin margins. These firms, long heralded as the backbone of U.S. industry, now find themselves squeezed between rising input costs and price-sensitive customers. For many, the choice is stark: absorb the tariffs and bleed cash, or raise prices and risk irrelevance. In states like Ohio, Pennsylvania, and Wisconsin – once swing states, now bellwethers of economic anxiety – the fallout is tangible. Factory floors are quieter. Order books thinner. The very communities Trump vowed to uplift are being ground down by policies bearing his name.

The clarion call of tariffs was to resurrect American jobs, to breathe life into industries battered by globalization. Yet, the truth is more tangled – and more troubling. True, some sectors, such as steel and aluminum, may enjoy a fleeting boost. But others, tethered to exports or imported materials, stare into an abyss. In the U.S., millions of jobs could be lost, as firms wrestle with soaring costs and shrinking markets. The irony stings: A policy heralded as a jobs savior may prove to be their executioner.

The labor market, already buffeted by technological upheaval and demographic shifts, now contends with this added gale. Tariffs, by inflating costs, may hasten automation. Robots, after all, don't balk at rising input prices. The sectors most exposed – manufacturing, agriculture, retail – employ millions. Their jobs are at risk too.

Meanwhile, for American households, the burden is no less acute. Tariffs, by design, inflate the price of imported goods – electronics, clothing, food. The tariffs could lead to a nearly $1,000 per household increase annually in the cost of goods, hitting the poorest families the hardest. Moreover, everyday staples, such as gaming consoles or groceries, could easily double in cost. These are no abstract figures; it's a palpable erosion of living standards, a vice tightening on already strained budgets for many Americans.

Picture a routine shop. A family picks up a laptop for school, jeans for work, groceries for the week. Tariffs inflate each bill. The laptop, assembled in China, incurs an extra 25 percent levy, adding hundreds of pounds. The jeans, woven from Indian cotton, follow suit. Even the groceries – tomatoes from Mexico, avocados from Chile – feel the sting.

Food prices are estimated to rise 2.8 percent overall thanks to Trump's 2025 tariffs, including 4 percent for fresh produce, according to a report from Yale University's Budget Lab. This stealth tax on consumption saps purchasing power and chokes economic dynamism.

Such hardship seldom passes without consequence. As Americans feel the squeeze, their frustration is already leading to Trump's approval ratings to be the worst in history. The Trump administration, steering through a fractious political terrain, may soon find itself beleaguered. Even loyal supporters, business leaders, economists, and base voters will eventually clamor for answers – and remedies.

With midterms on the horizon, Republicans in marginal seats may disavow the tariff gospel, fearing electoral oblivion.

This is no insular American saga. Tariffs beget retaliation. The EU and Canada had already issued counter-levies, and China is currently showing how to stand up against a bully who seemingly doesn't understand that his tariffs not only hurt Americans, but could crash the global economy.

Already, global supply chains are contorting in response. European and Asian firms, once reliant on American markets, are accelerating their pivot to new partners. Trade blocs are evolving without U.S. participation, forging frameworks that sidestep American influence. Washington's retreat into economic unilateralism threatens not only domestic prosperity but the global leadership that has underpinned it for decades. Allies are recalibrating. Rivals are recalculating. And the United States, long the architect of open markets, now flirts with the role of obstructionist – less leader of the free world than cautionary tale.

In the end, the tariff trap is a wound of America's own making, a policy that pledges protection yet delivers pain. The administration stands at a crossroads: cling to protectionism and court economic solitude, or embrace a nuanced tack that acknowledges global interdependence.

For Americans, history teaches that economic discontent remolds the political landscape: witness the New Deal, born of the Great Depression, or "Reaganomics," forged in the fires of 1970s stagflation. The question is whether Trump will heed these portents or be consumed by them. Given his track record thus far, it will likely be the latter.

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