TRUMP’S TARIFF PLAN: A HIDDEN INFLATION RISK FOR THE USA?

SYNOPSIS

Trump's tariff policies, aimed at protecting U.S. industries, have instead raised consumer prices and contributed to inflation. With new tariffs in 2025, economic uncertainty grows, impacting businesses and households, and making everyday essentials more expensive for Americans.

Analysis of Tariff Strategies: Exploring Potential Inflation Risks in the U.S. Economic Landscape.

Trade policies may seem distant from everyday life, but their impact is felt in rising grocery bills, car prices, and overall living costs. Donald Trump, during his tenure implemented tariffs on steel, aluminium, and Chinese imports to protect the American businesses. However these tariffs led to higher costs for consumers , economic uncertainty, and many lost their jobs. Now, in 2024, with the new tariffs on China, Canada, and Mexico, concerns about inflation and economic disruption come to the force once again.

What Are Tariffs, and Why Do They Matter?

Tariffs are taxes on imported goods, which makes the foreign products expensive. These are imposed to encourage domestic production. But costs for businesses that rely on imports increases and they pass these costs to consumers, increasing prices on everyday items like electronics, clothing, and food.

During Trump’s first presidency, tariffs targeted goods worth billions of dollars, with China being a primary focus. The goal was to boost American manufacturing jobs, but the real burden fell on consumers and businesses. Now, with a 25% tax on imports from Canada and Mexico and a 10% tariff on Chinese goods, similar consequences are emerging.

How Do Tariffs Contribute to Inflation?

Inflation occurs due to rise in prices of goods and services. This reduces the purchasing power of the consumers. Tariffs causes inflation as the cost of raw materials for businesses relying on imports increases, the price also increases. According to Peterson Institute for International Economics, President Trump's tariffs have already cost U.S. residents an excess of $1,277 yearly. New tariffs are expected to aggravate inflationary pressures, especially for poorer families.Despite the use of these protectionist policies, the U.S. trade deficit skyrocketed to $1.2 trillion in 2024, indicating the fact that tariffs haven't made so much difference in reducing dependence on foreign goods. Instead, they have hiked up costs and created a few other supply chain disruptions.

The automobile, agriculture, retail, and manufacturing industries suffered the most due to the tariffs. Steel and aluminum tariffs push the cost of car production even higher. Hence, car manufacturers such as Ford and General Motors were, forced to lay off a chunk of workers and consequently raise their price. China responded by imposing tariffs on U.S. soybeans and pork, resulting in colossal losses. The U.S. government provided $28 billion in aid to offset farmers' losses. Higher import tariffs contributed to increased prices of clothes, electronics, and appliances, leading to less consumer spending.But with inflation already squeezing household budgets, Trump add to another economic challenge by the latest tariffs. Businesses are adjusting supply chains to avoid tariffs, further increasing costs. Some Chinese manufacturers are rerouting goods through third countries, proving that tariffs do not necessarily reduce dependence on foreign imports—they just make everything more expensive.

Conclusion

While tariffs aim to protect American industries, history shows they often backfire—leading to higher prices and economic instability. If these policies continue, the real burden won’t just fall on businesses—it will be felt at every checkout counter across America.

Yash Thanki