Effects of Tariffs on U.S. Economy Pile Up

Tariff actions currently in effect and announced by the Trump administration could lower U.S. GDP by up to 0.65 percent, a report by The Tax Foundation has found. This includes new tariffs on China, currently (partly) paused tariffs on Canada and Mexico and tariffs on global imports of steel and aluminium that went into effect today. Also part of the calculation are tariffs on EU goods of 25 percent, announced February 26, and those of the same percentage share on motor vehicles and their parts, scheduled for April 2. All these tariff actions combined could also lower U.S. full-time employment by almost 600,000.

For comparison, The Tax Foundation estimates that 2018-2019 trade war tariffs, mostly with China, lowered U.S. GDP by just 0.25 percent and cost around 170,000 full-time jobs (including retaliatory action). The report estimates that tariffs could also lower U.S. after-tax incomes by 1.7-2.2 percent as well as increase costs for consumers. The Chinese trade war tariffs raised in 2018-2019 and those that stayed in place in the following years under the two countries' agreement already equaled an additional tax on the average American household by $300-$600 in 2023 depending on the calculation, the report says.

On the other side of the equation stands an increase of government income of between $229-263 billion from tariffs in 2025 (and slightly more each year after that if they stayed in place). However, compared to all of government revenue, this number would still be in the single digit percent share of the budget.