Detailed Analysis of Trump's Tariffs: GDP Foots the Bill, Trump’s ‘Rich Again’ Vision Falls Flat?

TradingKey — Since taking office, U.S. President Donald Trump has relentlessly wielded tariff measures, escalating their scope and intensity compared to his first term. Economists predict that Trump’s tariff policies will not only disrupt global trade patterns externally but also fail to align with his domestic agenda to make America "rich again."

The Trump administration has imposed or threatened tariffs on China, Canada, Mexico, the EU, and other regions, targeting sectors such as steel, aluminum, agricultural products, and automobiles.

According to Bloomberg, as of March 21, Trump’s new tariffs are expected to impact $1.81 trillion in trade:

• Global Trade: A 25% tariff on steel and aluminum imports took effect on March 12, affecting $200 billion in trade, reducing U.S. GDP growth by 0.2%, and raising inflation by 0.1%.
• China: A 20% tariff on Chinese goods began on March 4, impacting $445 billion in trade, lowering U.S. GDP growth by 0.2%, increasing inflation by 0.1%, and potentially slashing Chinese exports to the U.S. by 65%.
• Canada & Mexico: Tariffs on various products since March 4 affect $64 billion in trade, reducing U.S. GDP growth by 0.1%, with minimal inflationary impact.
• EU: Threatened 25% tariffs on EU goods could impact $60.6 billion in trade, potentially dragging U.S. GDP growth by 0.7% and raising inflation by 0.4%.

Expectations of rebounding inflation and slowing economic growth in the U.S. have become a consensus among institutions. The Federal Reserve’s March monetary policy meeting echoed similar concerns.

A study by the Tax Foundation warns that Trump’s tariffs could reduce long-term U.S. GDP by 0.2%, shrink capital stock by 0.1%, and eliminate 142,000 jobs.

The OECD notes that the tariffs will have net negative effects on the U.S., Canada, and Mexico, but China may emerge unscathed—reflecting potential for consumption-led recovery.

The OECD has revised its 2025–26 GDP growth forecasts: Canada’s growth was halved to 0.7%, Mexico’s 2025 GDP is expected to contract by more than 1%, and U.S. growth is projected at 2.4% and 2.1% for 2025-26 respectively. Meanwhile, China’s forecast has been raised to 4.8%.

"Make the U.S. Rich Again"? Not Quite.

Trump claims his tariffs aim to "Make the U.S. Rich Again," echoing his "Make America Great Again" (MAGA) slogan. However, historical precedent suggests that such policies may backfire:

• Consumers Bear Inflation: Studies show U.S. consumers absorbed nearly all tariff costs during Trump’s first term.
• Output and Jobs Suffer: The Journal of Economics estimates Trump’s 2018-19 tariffs caused a $25 billion net loss to the U.S. economy.
• Trade Deficits Persist: Economists argue the U.S. trade deficit stems from domestic savings-investment imbalances, not foreign unfair practices.
• Fiscal Deficit Challenges: By 2026, tariffs may generate $300 billion in revenue, but the resulting GDP declines could offset these gains by reducing national income and tax inflows.

April: A Turning Point?

With new "reciprocal tariffs" set to take effect on April 2, speculation is mounting over the rumored "Mar-a-Lago Accord." Some experts argue Trump’s tariffs are merely negotiation tactics aimed at securing favorable trade deals, which could later be reversed.

Henrietta Trez, director of economic policy at Vera Partners, notes a growing consensus  on Capitol Hill: "Once we get past April 1, there will be certainty, and markets will calm down."

Yet former Treasury Secretary Lawrence Summers warns that even if Trump rolls back tariffs, the damage is already done. The massive uncertainty continues to pose a significant threat to the economy.