Trump’s Tariff Threat: Will it Strengthen the US or Strain the World

Trump’s planned tariffs seek to strengthen domestic manufacturing, increase federal revenue, and safeguard the US dollar's dominance. However, they risk raising household costs, straining relations with key trade partners, and triggering shifts in global trade dynamics.

During his campaign, President-Elect Donald Trump proposed to raise tariffs to 60% for all goods imported from China and 20% for those brought in from the rest of the world. Mexico and Canada, the US’s top trading partners, will be facing a 5% additional tariff due to their failure to reduce irregular border crossings and drug trafficking. He also pledged to impose an additional 10% tariff on China due to the influx of Chinese drugs in the US.

Trump is widely recognized for imposing tariffs on imports from various countries as part of his America First policy. Tariffs provide a significant revenue source for the federal government, helping offset the decline in domestic tax revenues caused by tax cuts, as seen during his first term, wherein tariff revenues doubled to $74 billion between 2015 and 2020. The Tax Foundation estimates that a universal 10% tax will produce $2 trillion in federal government income between 2025 and 2023, while a 20% tariff will raise revenue by $3.3 trillion.

Tariffs aim to boost domestic manufacturing by making imports more expensive. This incentivizes businesses to shift supply chains and production facilities back to the US, potentially creating jobs and revitalizing the manufacturing sector. Additionally, tariffs seek to reduce the US trade deficit by discouraging imports and strengthening the US dollar.