Editor's note: Gao Zhijun is an assistant research fellow of the Chinese Academy of Social Sciences. The article reflects the author's opinions and not necessarily the views of CGTN. 

Since US President Donald Trump announced the sweeping worldwide tariffs on "Liberation Day" back on April 2, inflation has been a buzzword among policymakers, experts, and the general public. The pauses, exemptions, and other moderating adjustments implemented by the White House in the past couple of months have somewhat smoothed out the initial fears of the price hiking. The monthly readings of the US consumer price index (CPI) went up by only 0.2 percent, 0.1 percent, 0.3 percent, 0.2 percent in April, May, June, and July, respectively.

US lead negotiator Treasury Secretary Scott Bessent has consistently bragged about the Trump administration's success in dispelling the observers' inflationary concerns. He also emphasized that people tend to overlook other reformative actions that Trump has promoted to lower the costs of businesses and consumers, such as deregulation, tax cuts, and unleashing energy production. However, history and contemporary economic indicators are pointing to a different trend.

History does not support a "golden age" under high tariffs

Weeks ago, the Trump administration wrapped up its touted trade negotiations with dozens of economies, including the European Union, Japan, South Korea, Indonesia, the Philippines, and other Southeast Asian export-oriented economies. The overall US average tariff rate has reached 18.6 percent, the highest since 1933. One of the most noticeable elements in those deals is the asymmetrical (or ironically non-reciprocal) tariff rates between the US and its counterparts. For example, the US will charge 20 percent for imports from Vietnam, meanwhile, Vietnam will charge zero tariffs on US exports. Trump saw such disproportionately uneven deals as a victory of his administration's efforts in overhauling the global trading system in the US favor. The White House has consistently stressed the necessity for this "shock therapy" to cure the long-persistent diseases of the nation's economy, including trade deficits, manufacturing decline, job displacement, and community collapses. In Trump's eyes, the list of diseases caused by unfair trading rules can go on and on. He has repeatedly promised the American people that the golden age would be around the corner.  

Unfortunately, history has shown a rather pessimistic picture for the economic consequences of high tariffs. The infamous Smoot-Hawley Tariff Act pushed the US effective tariff rate to 17.75 percent in 1930, prompting a Beggar-Thy-Neighbor policy among major economies and ultimately leading to the Great Depression. In 1971, then-US President Richard Nixon implemented a 10 percent surcharge for imports along with a series of other policy adjustments in response to rising inflation and risks of currency crises. Nixon achieved political victory by winning the re-election in 1972, as the voters believed that the White House did the right thing to rescue them from price volatility and exchange rate instability. However, the policies ended with an economic failure for prolonging the stagflation in the 1970s and worsened the instability of floating currencies. These anecdotal examples suggest that Trump's "shock therapy" is more likely to cause economic catastrophe rather than creating a golden age.  

US producers are starting to pass the tariff costs to the consumers

Although Trump's economic team has relentlessly refuted the inflationary concerns by citing "insignificant" changes in monthly CPI since the Liberation Day, the devil is always in the details. The specifics of CPI, producer price index (PPI), along with other indicators, have signified the looming pressure of inflation in the coming months. On CPI, despite a marginal increase of 0.2 percent in July, the core CPI (excluding food and energy) went up by 0.3 percent for the month and 3.1 percent from a year ago, marking the highest since January and February this year, respectively. Moreover, the effect of tariffs is showing up in a number of categories. Household furniture and supplies increased by 0.7 percent; shelter also rose by 0.2 percent; transportation and medical care services climbed by 0.8 percent. These sectors are generally considered tariff-sensitive.

It is also noticeable that the PPI jumped 0.9 percent in July, the biggest monthly increase since June 2022. In the previous month, most producers chose to absorb the tariffs rather than pass them to consumers. This was largely due to the uncertain tariff rate resulting from US's ongoing negotiations with partners. As the tariffs on those major exporters began to take effect on August 7, prices might continue to rise in August and thereafter.

On the monetary policy front, US Fed Chair Jerome Powell's speech at the 2025 Jackson Hole Economic Policy Symposium on August 22 indicated a possible interest rate cut in mid-September. Powell stated that "with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance." Given that the year-over-year changes in personal consumption expenditure (PCE, a measure for price changes preferred by the Fed over CPI) are still above the 2 percent target, the Fed's potential rate cut is likely to add more fuel to the fire.

People's economic welfare tends to be compromised  

Empirically, the downsides of high tariffs tend to be ultimately borne by the public. The Yale Budget Lab estimated that Trump's tariffs would lead to a price increase of 1.8 percent by the end of 2025, which is equivalent to $2,400 income losses for an average American household. Furthermore, the tariffs will burden lower-income households disproportionately compared with their high-income counterparts. The Yale Budget Lab's simulation results showed that the short-run burden on the lowest 10 percent income group is three times larger than the top 10 percent. This would deteriorate the already widening income inequality and social polarization in the nation.

A popular rationale for the sweeping tariffs among Trump's team is that the US has become a major revenue gainer through the tariffs and is expected to collect over $300 billion in tariff revenues in 2025. This amount of money will be used to offset the tax reduction and increases in border control, thereby contributing to a more balanced fiscal standing. However, the picture appears to be less rosy. According to the Peterson Institute of International Economics, the tariff revenue the US collected in the first half of 2025 only reached $93.93 billion, contributing to merely 5 percent of the Congressional Budget Office's projected annual deficit.

The job market has also demonstrated less optimistic signs. Nonfarm payrolls growth reached 73,000 in July, well below the Dow's conservative estimate of 100,000. The job numbers for June and May were revised sharply lower, down by 133,000 and 125,000 from previously announced levels. The weak job report enraged Trump, leading to the dismissal of Erika McEntarfer, commissioner of the Bureau of Labor Statistics. Trump has named E. J. Antoni as the successor, who was the former chief economist at the Heritage Foundation – a think tank that crafted Project 2025, which was widely viewed as Trump's policy agenda.

In history, the economic consequences of tariffs have been unpleasant. No matter whether similar stories would appear on the show again, Trump's "shock therapy" to the global trading system would continue imposing tremendous risks to the US economy and other parts of the world.