Key Takeaways
- President Donald Trump’s tariff campaign has broken down some foreign barriers to U.S. trade.
- The preliminary agreements could be especially significant if they open foreign markets to U.S. autos, one trade expert said.
- The tariffs have also brought in billions in revenue to government coffers.
- The trade war victories have come at a cost to the economy, potentially stoking inflation and slowing down economic growth, according to experts.
Seven months into President Donald Trumps campaign to rebalance global trade in Americas favor, the White House can point to several wins, but experts say the victories have come at a cost to the economy.
Since his inauguration, Trump has worked to raise tariffs on nearly every U.S. trading partner. One of the major stated goals of the import taxes was to use them as leverage to bring foreign countries to the negotiating table.
We will supercharge our domestic industrial base. We will pry open foreign markets andbreak down foreign trade barriers, Trump said in an April 2 speech announcing a swath of reciprocal tariffs. More production at home will meanstronger competition and lower prices.
Since then, Trump has announced preliminary agreements with most of Americas largest trading partners, including the European Union, Japan, South Korea, Great Britain, and Vietnam.
Here is what the U.S. has gained from Trump’s trade wars so far:
Opened Foreign Markets
Under the terms of the agreements, foreign countries will lower at least some of their own tariffs and trade barriers on U.S. products, potentially giving a boost to U.S. exporters.
For example, the agreement with Great Britain “will include billions of dollars of increased market access for American exports, especially for beef, ethanol, and certain other American agricultural exports,” the White House said in a statement. Britain will “reduce or eliminate numerous non-tariff barriers that unfairly discriminate against American products,” the statement said.
Anthony Rapa, co-chair of the international trade practice group at law firm Blank Rome, said the reduction of foreign trade barriers could be significant, especially for the auto industry, which has historically had a hard time breaking into markets in Japan and Europe.
“In some countries, the U.S. auto industry has been entirely shut out,” Rapa said. “So if there actually is going to be market access for the U.S. auto industry, that would be a game changer.”
Undefined Investments
Many of the trade deals have included promises by foreign countries to invest in the U.S. or buy products from U.S. companies. For instance, the E.U. agreed to buy$750 billion worth of energy from the U.S., while Japan will make $550 billion worth of investments in the U.S.
Details of those commitments are unclear, including how exactly countries will pay the money and who will get it. Past trade agreements have taken months or years to negotiate, Rapa said, so the exact nature of the investments may not be clear for some time.
There are details that are to be fleshed out as time goes on, Rapa said. I think well need to see what is considered to be an investment by the other country. Are we talking equity investments? Are we talking about starting businesses here? Talking about buying assets, buying real estate, financing?
Tariff Revenue
Another notable feature of Trump’s trade deals is that they have left historically high tariffs in place. Tariffs on imports range from 10% on British goods to 20% on those from Vietnam, although these rates are lower than the ones Trump had threatened earlier.
One undoubted economic benefit of the tariffs is the sheer amount of money they put in government coffers, helping offset the impact of Trumps other major economic policy, the massive tax and spending bill he signed into law earlier this year.
The Tax Foundation think tank estimated last week that the tariffs will generate $2.3 billion in revenue over the next 10 years.
At What Cost?
The trouble for the economy is that U.S. companies and consumers could be the ones paying all that money.
Many economists and trade experts say importers will sooner or later pass most of the cost of tariffs along to the final customer. Trump and White House officials have disagreed, contending that foreign companies and governments will shoulder the burden.
According to the Yale Budget Lab, the average tariff of 18.6% is the highest since 1933. Yale researchers estimate that the tariffs will cost a typical household $2,400 in 2025 alone.
Many economists blame the tariffs for signs of an inflation flare-up in the past few months. The tariffs could also slow the economy by hurting consumer spending and discouraging investment.
Numerous economists project that the economy will grow more slowly than if the tariffs had not been in place, even after accounting for the benefits of the trade deals. The Tax Foundation, for instance, estimates the economy, as measured by Gross Domestic Product, will be 0.9% smaller than it would have been without the trade wars.
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