US 'Reciprocal tariffs' boomerang on domestic businesses

Editor's note: Zhou Jianjun is an assistant researcher at the Institute of State System Research and the School of Economics, Zhejiang University. The article reflects the author's opinions and not necessarily the views of CGTN.

Major US corporations are reporting significant tariff-induced losses in their Q2 earnings releases. General Motors attributes $1.1 billion in quarterly losses to the policies, with net profits plunging 35.4 percent year-over-year to $1.9 billion. Similarly, automaker Stellantis warns of potential first-half losses reaching $2.7 billion due to tariff impacts. Citibank's economic analysis team cautions that new tariff escalations could further squeeze corporate profit margins across sectors.

US global supply chains dominance undermined by self-defeating tariffs

As the world's largest developed economy, the US possesses the biggest consumer market and hosts the largest number of multinational corporations, benefiting enormously from globalization-driven supply chains. By capitalizing on global supply networks, American businesses have maintained their globally competitive edge—producing high-quality goods at reduced costs while securing significant profits.

However, Trump's tariff policies have undermined the stability of these global supply chains. The steep tariffs imposed on foreign goods have raised the cost of US imports, forcing domestic businesses to purchase more expensive intermediate products. Worse still, these tariffs threaten to disrupt the supply of critical raw materials and components, compelling US firms to invest heavily in finding alternative sources—a costly and disruptive process that could severely harm their operations.

Ironically, Trump's intended strategy—using "reciprocal tariffs" to protect domestic industries—has backfired. These measures have created a "Boomerang Effect," ultimately inflicting substantial damage on US companies they were meant to defend.

The ripple effect of 'reciprocal tariffs' has just begun: US businesses face prolonged pain

Over the past four months, the damaging effects of "reciprocal tariffs" on the US economy have begun to surface. Yet, due to the inherent lag in policy impacts, the current fallout may only be the first wave—with far more severe consequences expected to hit in the next six to 12 months.

Recent labor market data paints a troubling picture. The July 2025 non-farm payroll report revealed a meager seasonally adjusted job gain of just 73,000—well below market expectations of 110,000 and the weakest growth since October 2024. Even more alarming, previously reported employment figures for May and June were drastically revised downward—from 144,000 to 19,000 and 147,000 to 14,000, respectively. These revisions suggest that the harm inflicted by "reciprocal tariffs" on US businesses and employment has been severely underestimated.

The sharp slowdown in hiring reflects deepening pessimism among US firms, many of which are now freezing recruitment and shelving expansion plans. Worse, when the full weight of tariff-driven disruptions accumulates, the pain for American businesses will intensify.

Signs of distress are already emerging. A July 31 report by Challenger, Gray & Christmas showed U.S. employers announced 62,075 job cuts in July alone—a 29 percent monthly increase and a staggering 140 percent surge compared to July 2024. Cumulatively, 806,383 layoffs were recorded in the first seven months of 2025, marking a 75 percent year-over-year rise and the highest level since 2020.

While factors like AI-driven restructuring and the speculative "DOGE Effect" may contribute, the primary driver appears clear: U.S. businesses are anticipating prolonged economic strain and are forced to cut costs preemptively before the storm fully arrives.

US businesses and consumers bear the brunt of 'reciprocal tariffs' as policy goals backfire

Trump's strategy of reducing trade deficits through "reciprocal tariffs"—by curbing foreign imports to revive domestic manufacturing while shifting costs to other countries—fails to acknowledge a critical reality. Namely, the US has long depended on global manufacturing as its own industrial base has weakened, leaving it unable to compete effectively. Maintaining access to high-quality, affordable goods can only be secured by participation in free trade and global supply chains instead of punitive tariffs.

Imposing steep tariffs on major manufacturing nations effectively functions as a tax on US businesses and consumers. The resulting surge in costs for both intermediate goods and finished products will erode corporate profits and inflate household expenses. The US sought to exploit global resources through "reciprocal tariffs", but the policy boomeranged, hitting its own economy. Trump's approach will not revive American manufacturing or reduce trade imbalances—it will simply force US businesses and citizens to bear the burden of higher costs and economic inefficiency.