Why the Trump Tariffs Will End in Economic Failure for the United States
This page summarizes mainstream empirical research and recent nonpartisan analyses on broad import tariffs. Sources are listed at the bottom and footnoted in each section.
Last updated: Sept 6, 2025
TL;DR
- It’s a giant tax on Americans. Tariff costs are largely passed on to U.S. consumers and firms buying inputs.1
- Our exporters get hit back. Retaliation shrinks markets for U.S. goods, especially agriculture.2
- Investment, productivity, and wages suffer. Models and data show lower GDP and wages as uncertainty and costs rise.3,4
- “Revenue” isn’t free. Deficits can fall, but at the expense of higher inflation and a smaller economy.3
1) Tariffs = Higher Prices for Americans
Multiple peer‑reviewed and government studies find tariff increases are mostly or fully passed through to U.S. import prices—meaning Americans pay most of the bill. Higher input costs ripple through supply chains, raising prices for finished goods and compressing margins at U.S. manufacturers.1,4,5
Visual is schematic; see sources for exact estimates and methods.1,4,5
2) Retaliation Hurts U.S. Exporters
Broad U.S. tariffs invite broad retaliation. In 2018–2019, retaliatory tariffs slashed U.S. agricultural exports by >$27B, led by soybeans, pork, and sorghum; market share can be permanently lost as buyers switch to competitors.2
3) Growth & Wages Decline
Modern quantitative models and fresh data show that across‑the‑board tariffs reduce real GDP and wages by raising costs, depressing investment, and increasing policy uncertainty. PWBM’s dynamic analysis shows long‑run real GDP down about 6% and wages down about 5% under the 2025 tariff program.4CBO, using a different framework, also finds a smaller economy and higher inflation in the near term.3
4) The “Revenue” Mirage
Yes, tariffs raise customs revenue. But nonpartisan analysis shows they also raise inflation and shrink real output. CBO estimates the tariffs add about 0.4 percentage points to inflation in 2025–26 and lower real output versus baseline—even as the deficit falls.3Using tariffs to cut deficits is like bailing a leaky boat with your shoes: you might move the water, but you ruin the shoes and still don’t fix the leak.
5) Sector Evidence: Prices Up, Supply Chains Warped
Product‑level studies document sizable price increases for targeted goods (e.g., electronics, machinery, steel‑adjacent sectors), with only modest and uneven output gains. Firms divert purchases to non‑targeted sources or redesign supply chains—expensive workarounds that add friction without boosting productivity.5
Bottom Line
Across‑the‑board tariffs are a doom loop: they tax Americans, trigger retaliation against our exporters, stifle investment, and leave the U.S. economy smaller and poorer. Durable prosperity comes from productivity, competition, and rule‑of‑law trade—not all‑sides tariff wars.
Household Cost Calculator (Back‑of‑the‑Envelope)
This quick tool shows how tariff‑driven price increases flow through your budget. Defaults reflect mainstream evidence: high pass‑through and PWBM’s observed effective rate as of June 2025. Adjust the sliders to match your situation. Results are illustrative.
References
- Amiti, Redding & Weinstein (NBER 2019/JEP 2019). The Impact of the 2018 Trade War on U.S. Prices and Welfare — near‑complete pass‑through to U.S. prices; real income losses.
NBER w25672 · JEP article - USDA ERS (2022). Economic Impacts of Retaliatory Tariffs on U.S. Agriculture (ERR‑304) — >$27B export losses in 2018–19; heavy concentration in soybeans.
ERS report - Congressional Budget Office (June 4, 2025). Budgetary and Economic Effects of Increases in Tariffs… — inflation +0.4 pp in 2025–26; deficits down but real output falls.
CBO letter - Penn Wharton Budget Model (Apr 10, 2025). Economic Effects of President Trump’s Tariffs — long‑run GDP ≈ −6%, wages ≈ −5%; multi‑trillion revenue with economic costs.
PWBM analysis
Penn Wharton Budget Model (Aug 14, 2025). Effective Tariff Rates and Revenues (through June 2025) — effective tariff rate 9.14% (China ≈ 39.8%).
PWBM tracker - USITC (2023). Economic Impact of Section 232 and 301 Tariffs on U.S. Industries — higher prices; import diversion; limited output gains.
USITC report - Fajgelbaum, Goldberg, Kennedy & Khandelwal (QJE, 2020). The Return to Protectionism — welfare losses & near‑complete pass‑through; exports hit by retaliation.
QJE article