Although it does bring money into the treasury [in fiscal year 2025, the US government collected $195 billion, 250 percent more than last year, ed.], it has many undesirable effects that are not immediately apparent.
Tariffs have a direct impact on increasing local price levels, which has been evident since April. Analysts estimate that the trend will continue in the coming years, as the full consequences have not yet been felt.
Although the costs of tariffs are usually initially borne by foreign companies (which is often the reason for foreign countries to take countermeasures), over time they are passed on to end prices. And their growth means lower purchasing power for Americans.
At the same time, rising import prices dampen competition, and American companies are less compelled to innovate and be efficient. They can also afford to set higher prices. For people, however, this means they will buy less. Companies, in turn, will produce less, employ fewer people, have lower sales, pay lower taxes... And these consequences are borne not only by American companies, but also by foreign companies for which the US is a lucrative market.
Despite the theory, however, after more than half a year, there are no signs that the US economy is significantly stalling. On the contrary, in the second quarter, it continued to grow by 3.8 percent, and estimates say that in the third quarter, it should perform only slightly less well. And although prices have risen, there is no galloping inflation for the time being.
Even though the reality is more lukewarm than originally estimated, it should be taken into account that the final tariffs are lower than Trump originally announced. The world has once again sat on its hands and not engaged in a trade war with him.
Although the effect of the tariffs is not so visible, this is a natural phenomenon. It is similar to when Europe decided to introduce carbon tariffs, emission allowances, and an embargo on Russian gas and oil, refusing to compete over who would offer commodities for the best price.
Tariffs are simply a long-term [because they are difficult for new governments to abolish due to their impact on state revenues, author's note] unnecessary cost that manufacturers in a given country bear as a result of political decisions. There is no external short-term shock.
However, despite the negative aspects of Trump's actions, free trade is not ending this year as the loser. Many countries are diversifying their exports. Even though China is exporting less to the US, this is not noticeable overall. In the first 11 months of the year, it recorded a 5.7 percent increase in exports compared to last year. Especially to Europe, Southeast Asia, and Africa.
Tariffs are simply distancing the world from the United States and bringing third countries closer together. Protectionism will not bring America greater prosperity than unrestricted trade. Sure, it may be justified in strategic sectors, but an overly closed attitude only impoverishes it unnecessarily.
