The ascendency of Donald Trump (for the second time) has caused carnage in the USA and for that matter all over the world. With one of the earliest decisions in his tenure to impose tariffs on imports into the USA, Trump strives for a more independent, invincible country relying on only domestic produce.
What is a tariff? Tariffs are taxes on imported goods, deterring the volume of imports into a country.
Alongside his bold MAGA (Make America Great Again) strategy, the decision of imposing tariffs has caused chaos worldwide. But is this really the work of a pedantic, crazy man or is this potentially a game-changing decision that promotes the USA to an even more dominant position?
In this blog, I will outline the different sides of the argument of the decision to impose these tariffs for all parties involved, the short and long term effects and other alternative solutions alongside my personal opinion.
Key Takeaways
Steel & Aluminium Tariffs – The U.S. imposed a 25% tariff on all steel and aluminium imports to boost domestic production. The EU and Canada announced retaliatory measures.
Trade War with Canada & Mexico – A 25% tariff on all imports from Mexico and Canada, plus 10% on Canadian oil, led to tensions and potential USMCA violations.
Inflation Concerns – Tariffs are expected to push inflation to 2.7%, raising costs for businesses and consumers.
- Automotive Price Surge – Higher import costs may increase car prices by $4,000–$12,000, affecting both new and used car markets.
Strained Global Relations – Trade tensions with key allies and China have escalated, with calls for diplomacy over confrontation.
1. Trump’s 2025 Tariffs: What’s New?
Trump’s 2025 tariffs mark a significant shift in U.S. trade policy, reigniting tensions with key trading partners. The new measures include:
25% tariffs on steel and aluminium imports to boost domestic production.
25% tariffs on all imports from Mexico and Canada, with an additional 10% tariff on Canadian oil and energy exports.
Justifications ranging from national security to reducing the trade deficit and addressing immigration and drug trafficking concerns.
Immediate backlash from Canada, Mexico, and the EU, with threats of retaliatory tariffs and legal challenges.
These sudden tariffs are impactful and although they do target the long term, the short term effects are quite drastic especially for the countries that have the tariffs imposed on.
Below is a diagram to just demonstrate a few items that have been impacted already:
2. Economic Impact: Higher Prices & Inflation Risks
In a survey carried out asking citizens and experts the impact of a 10% US tariff on economic growth on the European Union over a 4 year period, most responses concurred with a reduction in economic growth slightly. This estimate and analysis does not look positive for countries worldwide despite the impact they may have for the US in the long-term.
With higher taxes on imports into the USA, the dependency on domestic demand will increase, and more pressure will be on domestic produce. In turn this should make them more competitive and deter foreign products, and also should increase aggregate demand in the long run, deduced form the formula (Aggregate demand = Consumption + Investment + Government Spending + Exports - Imports). As the volume of imports decreasing, aggregate demand is increasing, in turn increasing economic growth in the USA, however this could decrease economic growth for countries exporting to the USA. This is because using the formula, the volume of exports are decreasing causing aggregate demand to decrease and therefore reducing economic growth.
3. Trade Wars 2.0: Global Reactions & Retaliation
After the arrival of Trump for the second round, the world waits in anticipation for Trump's next move and preparing solutions to political, attacking decisions. Immediately, Mexico imposed tariffs, similarly to the US of an applicable rate of 25%, on American imports as a reply to $236 billion worth of imports affected.
Like Mexico, Canada and China have imposed their own retaliatory tariffs to combat the American tariffs. China is especially targeting Amazon with the retaliatory measures as Amazon work in high volumes between the two supergiants. Trump’s 2025 tariffs have sparked significant global backlash, leading to escalating tensions and retaliatory actions. Canada and Mexico have both implemented counter-tariffs on U.S. goods, particularly targeting agricultural and manufactured products, while also raising legal challenges to the tariffs under the USMCA. The European Union has threatened to impose retaliatory tariffs on U.S. exports, focusing on high-profile sectors like luxury goods and agricultural products, signalling a strain in transatlantic relations. China has expressed caution, warning that these tariffs could worsen trade tensions, but is advocating for diplomatic dialogue and seeking negotiations to prevent further escalation. Other global players, such as Japan, South Korea, and Australia, have voiced concerns but have largely refrained from immediate retaliation, opting for negotiation and realignment of trade partnerships. As a result, the tariffs have reignited a global trade war, with nations adjusting their strategies in response to U.S. measures, which could significantly disrupt supply chains and international relations.
4. Winners & Losers: Industries That Gain or Suffer
Trump’s 2025 tariffs create both opportunities and challenges for different industries. Some sectors stand to benefit, while others face higher costs and disruptions.
🏆 Winners
Steel & Aluminium Industry – Higher tariffs on imports could boost domestic production and profitability for US manufacturers.
Energy Producers (US) – Tariffs on Canadian oil may drive increased demand for US produced energy.
Some Domestic Manufacturers – Companies producing goods domestically, with minimal reliance on imports, could see reduced competition.
⚠️ Losers
Automotive Industry – Higher tariffs on steel, aluminium, and parts imports could raise vehicle prices by $4,000–$12,000, affecting sales.
Agriculture & Farming – Farmers may face retaliatory tariffs, making US exports (like soya beans and dairy) less competitive in global markets.
Retail & Consumer Goods – Higher import costs could lead to increased prices on everyday products, hitting consumers directly.
Manufacturing & Supply Chains – Many US manufacturers rely on imported raw materials and components, leading to higher production costs.
While certain industries may gain from protectionist policies, others face economic strain and potential job losses due to higher costs and trade disruptions.
5. My opinion
While most of Trump's tariffs and policies, have been harsh on American citizens as well as people worldwide, they do seem to have potential to be impactful for the USA in the long run. However, the difficulty will persist in the short term and possibly even a reduction in economic growth as time is required for further development of domestic products. Also, many relationships may fall apart for the USA as the tariffs will most likely negatively impact other nations who will be dissatisfied with this extra burden. Therefore, there is a chance that they will break trade relationships with the USA, if ever the USA need economic help, it may be hard to come by.
FAQs
What is the best response by the EU to US tariffs, to minimise damage to the European economy, combining economics, bargaining, and geopolitical considerations?
There are many responses possible in this situation, the main option is utilising retaliatory tariffs to combat and the opposing tariffs and uphold economic growth. Although retaliatory tariffs could be very harmful to relationships, these tariffs would be one of a few ways to protect their own economy. For example, if the US increased tariffs on the European Union, to protect their economy, the European Union should increase tariffs on the US. Another valuable response is to partner with non-USA based parties which more than likely could cause a trade war, some experts recommend concessions in other areas. Combining economics, bargaining and geopolitical considerations is key in order to avoid an escalation of the tariffs and minimise the damage at hand. Below is a bar chart representing all the different and tactical methods to minimise the effect on the European economy:
What tariffs are currently in effect?
As it stands, the Trump administration has imposed an additional 20% tariff in imports from China. A 25% tariff on all imports from Mexico and Canada has been paused for all goods that fall under the USMCA treaty; that pause applies to roughly 50% of goods imported from Mexico, and 38% of those imported from Canada. 25% tariffs on all steel an aluminium imports have taken effect, triggering retaliatory tariffs from the European Union on €26 billion ($28.1 billion) worth of US goods. Many other countries are awaiting for their turn to be imposed tariffs on, however as of now these are the main victims of the cruel tariffs of Mr. Trump.
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