Tariffs, Good or Bad?

It has been 43 days since Trump became president of the United States on January 20th, 2025. Since then, he has shocked the world with sweeping tariffs hitting both allies and adversaries. From the EU to China, Trump has imposed unprecedented tariffs not seen in almost a hundred years. While the US has had trade wars with individual nations and on specific goods over the last couple of decades, this level of sweeping tariffs on so many types of imports has not been seen in a long time. The consequences and benefits of these tariffs will only become clear with time.

The first thing to address is what exactly Trump has placed these tariffs on. Trump has imposed tariffs on steel and aluminum, a 25% tariff on all goods imported from Canada and Mexico, and a 20% tariff on all Chinese goods, on top of the 10% tariff on Chinese goods already in place before Trump’s administration. Trump has also threatened a 200% tax on wine, champagne, and other alcoholic products from European Union countries. All the countries affected by these tariffs have responded with tariffs of their own. China has responded with a 15% tariff on US farm goods. Canada and Mexico have responded with their own tariffs, and the EU has imposed tariffs on $28 billion worth of US goods. It should be mentioned that after individual calls with the Mexican and Canadian leaders, Trump agreed to postpone the tariffs until April. However, this pause on tariffs has not extended to China. Most economists hope that these tariffs will not last long and are only being imposed to gain leverage in trade negotiations and geopolitical talks.

Photo courtesy of CNN

            Despite being in office for only a few weeks, and the tariffs being only recently imposed, their full effect has not yet been seen. However, the impact of these tariffs has already been felt in the stock market. The S&P 500 has fallen 8% since January 20th, and the Nasdaq has fallen 10% in the same period. These drops reflect the lack of confidence investors have in Trump’s tariffs and their long-term effect on the US economy. Many critics have cited this as evidence that the tariffs have been negative thus far. However, it should be noted that Trump is planning to impose reciprocal tariffs starting April 2nd on the tariffs that have been placed on US goods. This is the next major event investors are watching, and how the market reacts will reflect the confidence investors have in the tariffs. Overall, the tariffs have had a negative effect on the economy so far. However, Trump has generally stated that the goal of the tariffs is not to benefit the US economy but to give the US leverage in negotiations with other countries.

These tariffs have now put the US in a position where we are banking on the strength of our economy to determine their outcome. If the US economy can outlast other economies and force other countries to meet our demands, then the tariffs could be beneficial. However, if the US economy has weakened enough over the last couple of years, the tariffs could backfire and put the US in an even worse position trade-wise and economically. The outcome has yet to be seen, but whatever happens will likely have a major impact on how the second Trump administration is perceived by the public for years to come.