Tariff Macroeconomics: Can the U.S. Profit from a Trade War?
Economy
The Trump administration’s plan to sharply raise import tariffs may temporarily reduce the U.S. budget deficit, but at the cost of higher inflation and slower growth. Economists warn that the short-term fiscal gain could be outweighed by long-term economic pain.
The decision marks the most radical shift in U.S. trade policy in decades. Analysts estimate that the new tariff levels will rise roughly twentyfold, surpassing the infamous Smoot–Hawley Tariff Act of 1930, widely blamed for deepening the Great Depression.
Global markets reacted immediately: major corporate shares fell, investors reassessed positions, and foreign governments began weighing retaliatory duties, particularly targeting politically sensitive sectors such as U.S. agriculture and high-tech exports.
According to Anton Tabakh, chief economist at Expert RA, higher tariffs could bring short-term budget gains through import duties and partial reshoring of production. However, inflationary pressure, rising interest rates, and the risk of recession could quickly erase these benefits.
Experts also note that returning manufacturing to U.S. soil may boost employment but raise production costs, reducing household purchasing power and domestic demand — the core driver of the American economy.
Washington’s tariff experiment remains a politically powerful yet economically fragile strategy. While it may strengthen fiscal discipline in the short run, it risks fueling broader instability in the long term.
Global markets reacted immediately: major corporate shares fell, investors reassessed positions, and foreign governments began weighing retaliatory duties, particularly targeting politically sensitive sectors such as U.S. agriculture and high-tech exports.
According to Anton Tabakh, chief economist at Expert RA, higher tariffs could bring short-term budget gains through import duties and partial reshoring of production. However, inflationary pressure, rising interest rates, and the risk of recession could quickly erase these benefits.
Experts also note that returning manufacturing to U.S. soil may boost employment but raise production costs, reducing household purchasing power and domestic demand — the core driver of the American economy.
Washington’s tariff experiment remains a politically powerful yet economically fragile strategy. While it may strengthen fiscal discipline in the short run, it risks fueling broader instability in the long term.
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