US tariff policies: The hidden costs of unilateral protectionism

Editor's note: Tang Jie is a researcher at the Chinese Academy of International Trade and Economic Cooperation under the Chinese Ministry of Commerce. The article reflects the author's opinions and not necessarily the views of CGTN.

The United States' unilateral protectionism, characterized by high tariffs and other restrictive trade measures, was initially implemented to protect domestic industries and reduce trade imbalances, according to the logic of the US government. However, recent data and studies have revealed that these policies are producing significant adverse effects on the US economy through various channels, including direct cost increases for consumers and businesses, disruptions to supply chains, and exacerbating inflation.

One of the most immediate impacts of the high tariffs is the direct cost shift to businesses and ultimately the final consumers. Tariffs impose additional costs on imported goods, which are often passed down in the form of higher prices. For instance, a 25 percent tariff on steel imports may protect domestic steel manufacturers but also raise the cost of construction materials. This increase ultimately affects various industries, including the automotive and housing sectors, leading to higher prices for end consumers. A study by the Peterson Institute for International Economics found that US tariffs on Chinese imports cost the average American household approximately $1,277 per year. Products like electronics, appliances, and clothing — categories heavily reliant on imports — have seen significant price increases. The US Consumer Price Index for goods affected by tariffs has risen disproportionately compared to untaxed goods, indicating a direct price impact.

A study by the National Bureau of Economic Research reported that 80 percent of the US tariffs on Chinese imports were paid by American companies importing goods, not by Chinese exporters during the tariff conflict between 2019 and 2020. And now the situation is even worse than expected, US manufacturers reliant on imported components (e.g., semiconductors and machinery) face higher production costs. Added is the lower purchasing power of households, disproportionately affecting low-income families who spend a larger share of their income on basic goods. The competitiveness and profitability of US businesses have declined, particularly small and medium enterprises that cannot afford higher costs.

The interconnection of global supply chains means that unilateral protectionism can disrupt production processes and increase the risks of industrial chain disruption. The complexity of global supply chains means that tariffs on intermediate goods, for example, raw materials and components, increase production costs across industries. Tariffs can lead to increased costs for manufacturers who rely on imported components, forcing them to either absorb these costs or pass them on to consumers. This disruption can lead to inefficiencies and reduced competitiveness for US firms in the global marketplace. The increased production costs can hinder innovation and slow down technological advancements, putting American companies at a disadvantage compared to their international counterparts. Tariffs on Chinese goods have accelerated efforts to "decouple" US supply chains from China. However, relocating production to other countries or domestically is expensive and time-consuming.

Moreover, the unpredictable nature of US trade policy under protectionism has created uncertainty for firms making long-term investment decisions. As companies seek to mitigate these risks, they may relocate production facilities abroad, further eroding domestic job opportunities. A survey jointly conducted by Stiles Associates (2025) and the US Chamber of Commerce found that nearly 30 percent of the US manufacturers are considering shifting operations overseas in response to the tariff pressures, highlighting the potential for significant job losses and economic contraction in the US.

Perhaps one of the most concerning implications of high tariffs is their contribution to inflation. As tariffs raise the prices of imported goods, the overall cost of living increases. Economists predict that the cumulative effect of these tariffs could push consumer-price inflation to 3.3 percent over the next year, up from 2.3 percent in April. This inflationary pressure can create a vicious cycle: As prices rise, consumers demand higher wages, leading to increased labor costs for businesses. In turn, businesses may raise prices again to maintain profit margins, further fueling inflation. Persistent inflation erodes household savings and wages, reducing consumer spending — an important driver of the US economy. The Federal Reserve has noted that persistent inflation can undermine economic stability, leading to tighter monetary policy and higher interest rates. These measures can constrain borrowing and investment, slowing economic growth and potentially leading to a recession.

US unilateral protectionism can also be viewed through the lens of hegemonic bullying. By imposing tariffs and trade restrictions without multilateral consensus, the US risks alienating key trading partners. Countries affected by US tariffs may retaliate with their own trade measures, creating a tit-for-tat scenario that can escalate into broader trade wars. Such conflicts can lead to uncertainty in international markets, affecting investment decisions and disrupting trade flows. For example, the US-China trade war has significantly impacted both economies, but with greater impact on the US domestic market. Protectionist policies have made foreign investors wary of the US market, leading to reduced foreign direct investment.

As the evidence mounts regarding the negative impacts of unilateral protectionism, it is becoming increasingly clear that the US must reevaluate its tariff policies. A more balanced approach that emphasizes collaboration with international partners and promotes fair trade practices could yield more sustainable economic benefits.

In a globalized economy, cooperation often yields better results than isolationist policies. The time has come for the US to lead by example, embracing a trade policy that fosters mutual growth rather than unilateral economic stagnation.