COMMENTARY: U.S. economy will suffer under Trump tariffs

So much for the notion that Donald Trump’s April 2025 “liberation day” reciprocal tariff announcement was a brilliant ploy for the United States to get many favorable trade deals from its trade partners without getting us stuck with permanently high import tariff levels. Four months later, at best, we have a handful of partial trade deals that include no real way of enforcing the investment commitments made under those deals. Worse yet, we are now stuck with import tariff levels at their highest level in 100 years.

This will not be good for the country’s economic outlook. This is especially the case considering that these tariff increases are occurring in the context of a highly irresponsible budget policy that is placing our public finances on an unsustainable path and of an immigration policy that threatens to add to cost and production pressures, particularly in agriculture and construction.

In those circumstances, the last thing that the country needed was high import tariffs that would add significantly to inflation and constitute a drag on the economy. The punitive import tariffs that Trump is imposing on our trade partners are bound to land their economies with a serious body blow that could have spillover effects for our economy.

In April, at the time of his reciprocal tariff increase announcement, Trump assured us that countries would be falling over themselves to strike trade deals quickly on highly favorable terms to the United States. This has turned out to be far from the case.

Four months later, Trump has managed to strike partial trade deals with only the European Union, the United Kingdom, Japan, Indonesia, Thailand and the Philippines. Notably absent are trade deals with Canada, Mexico and China, our three largest trade partners, and with scores of smaller countries. Notably absent, too, are any enforcement mechanisms for the billions of dollars that those countries have committed to invest in the United States over the next few years.

Any hope that Trump was never serious about using high tariffs permanently has evaporated. In the best of cases, countries such as the United Kingdom, the European Union and Japan are stuck with baseline tariffs of between 10 percent and 15 percent. China, Canada and Mexico are stuck with tariffs of between 25 percent and 55 percent, as are most of our smaller trade partners. In addition, we now have sectoral tariffs of 50 percent on all steel, aluminum and copper imports. Meanwhile, studies are underway for similar tariffs to be imposed on the pharmaceutical, semiconductor and lumber industries.

Our economy will now be encumbered with import tariffs reminiscent of those that characterized the infamous 1930 Smoot-Hawley Act, which is generally accepted to have prolonged the Great Depression. According to the Yale Budget Lab, the United States will now be saddled with an average 18.5 percent tariff level. That is expected to add close to 2 percentage points to inflation and subtract 0.75 of a percentage point from economic output growth.

The weak job numbers over the past three months, together with the disappointing GDP numbers for the first half of the year, suggest that the tariffs and the chaotic way in which they have been introduced are already having a material adverse effect on the economy.

Beyond their immediate adverse effect, Trump’s erection of a high import tariff will cast a shadow over the country’s long-term economic growth potential. No longer will our country derive the full benefits from international trade that it derived before the Trump tariffs. No longer, too, will U.S. companies be subject to the beneficial pressures from foreign competition to remain efficient and innovative.

If the economy stutters in the months ahead as a result of Trump’s irresponsible import tariffs and budget policies, of one thing we can be sure. Trump will not assume responsibility. For that unenviable task, Trump is setting up Federal Reserve Chair Jerome Powell with his withering and incessant attacks on the Fed’s handling of monetary policy.

Desmond Lachman is a senior fellow at the American Enterprise Institute. He wrote this for InsideSources.com.