Why will U.S. tariffs hurt all economies including that of the U.S.?

By Hamzah Rifaat Hussain

TV screens show the stock market dropping, at Nasdaqheadquarters in New York City, the United States on April 7, 2025. /CFP

Although a 90-day pause in tariffs on most nations has been announced by the Trump administration, its “reciprocal tariffs” on both allies and perceived adversaries have jolted global stock markets, decreased investor confidence, plummeted global oil prices, slowed down domestic manufacturing sectors and contributed to greater global instability. It prompted major economies such as China, Canada and the EU to justifiably respond by adopting countermeasures.

On April 9, China added 12 U.S. companies to its export control list and six to its unreliable entities list, compounded with retaliatory tariffs of 84 percent on U.S. goods. A 25 percent tariff on a wide range of U.S. products has also been approved by the EU, given the scale of the impending havoc that his tariff measures will wreak on the global trade and economic system.

Pushing back on strong criticism against his announcement, U.S. President Donald Trump remains adamant that “reciprocal tariffs” will make the U.S. competitive again. Evidence, however, runs to the contrary. “Reciprocal tariffs” do not protect American interests nor reduce trade deficits, but instead constitute a self-destructive strategy for the U.S. domestically and the global economic system.

Here’s why.

Retarding domestic growth

Contrary to Trump’s assumption, the impact of tariffs on the American economy is simply negative. Notably, the measures are being implemented as the American economy struggles with a looming stagflation crisis, a slowing manufacturing sector and a contracting job market. Many Americans have to contend with glaring contractions in domestic factory activities.

In March 2025, the Institute for Supply Management’s Manufacturing Index, which measures the economic health of domestic manufacturing in the United States, registered 49 percent, which was 1.3 percentage points lower than February and well below the purchasing managers’ index threshold of 50. It hints at contraction instead of expansion in the economy.

Adding to this are job cuts by the Trump administration in the form of massive layoffs in federal agencies such as the U.S. Food and Drug Administration and the U.S. Center for Disease Control and Prevention, which have resulted in mass unemployment and domestic instability.

By implementing tariff measures, the Trump administration will only worsen the status quo by shifting the burden of higher costs to average American consumers. American manufacturers, previously benefiting from integrated supply chains with China, for example, could now face higher production costs due to the globally integrated nature of supply chains, which inevitably results in higher prices for products such as automobiles and food products that contribute to inflation.

The negative effects on American purchasing power is underlined by Anderson Economic Group, an American research and consulting firm, which contends that U.S. consumers could end up paying an additional $2,500 to $5,000 for lowest-tariffed American cars and up to $20,000 for some imported models, if the tariffs materialize.

The U.S.’s tariff salvo is also counterproductive for average American households. Shang-Jin Wei, professor of Finance and Economics at Columbia Business School, states that tariffs on China harm average American households who previously accessed foreign goods and services and further contends that exporting firms will have to deal with declining profits as well. Again, this does not translate into domestic economic stability or a reduced trade deficit.

People shop for products imported from Asia at a market in Los Angeles, California, the United States, April 7, 2025. /CFP

An increasing deal of global uncertainty about the outcome of the sweeping tariffs also dampens global businesses’ enthusiasm for investing in the U.S., which indirectly leads to a reduction in American exports, profits and revenue. It harms industries reliant on international sales of technology and critical minerals. Trump’s rhetoric of “Make America Great Again” by imposing tariffs only end up jolting Wall Street, increasing domestic interest rates and weakening the stock market.

An anathema to global trade

The U.S.’s “reciprocal tariffs” are also an anathema to the global economic and trade system. These measures blatantly disregard the World Trade Organization’s framework anchored in promoting apolitical trade between UN member states for collective prosperity, while creating global shock waves by encouraging countries to adopt commensurate protectionism in response.

“Reciprocal tariffs” can trigger a vicious cycle of trade disputes, while those instigated by the United States could risk bearing on global GDP growth rates, dealing a heavy blow to companies integrated with global supply chains, and increasing the risk of global recessions.

The Trump administration’s tariff measures spell out a formula for a more fragmented world, a fractured American domestic economy, and reduced reliance of other countries on American trade. The spiraling and ripple effects of countries engaged in retaliatory tariffs will only result in cumulatively lower trade volumes for all countries, and thereby constitutes a collective failure for the world economy.

Hamzah Rifaat Hussain is the senior expert at Hawaii-based think tank Initiate Futures. 

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