Donald Trump Is Waging A Tariff War - But Is It Making America Rich?

(MENAFN- Live Mint) Several countries worldwide remain on edge as President Donald Trump continues to impose a slew of tariffs on goods the United States imports from its trade partners, including India and Pakistan.

Trump announced on 2 April, so-called 'Liberation Day', a slew of“reciprocal” tariffs or import taxes. Trump twice delayed these tariffs, and many of these have been paused.

In the latest move, Trump signed a sweeping executive order on Thursday, imposing reciprocal tariffs ranging from 10 per cent to 41 per cent on American imports from a wide array of countries, dramatically reshaping the US trade landscape. Most of the tariffs will take effect after midnight on 7 August.

Also Read | Seven days, high stakes: Can India secure a trade deal before 7 August? Why is Trump imposing tariffs?

The US President argues that the tariffs would:

1. Boost American manufacturing; encourage US consumers to buy more American-made goods.

2. Protect jobs.

3. Increase the amount of tax raised; boost the average US rate on goods from across the world.

4. Increase investment.

5. Reduce trade deficit: the gap between the value of goods the US buys from other countries and those it sells to them.

However, these tariffs have also raised fears of inflation and other economic fallout in the world's biggest economy. As a result, the BBC reported that a number of firms have reportedly increased prices for US consumers.

Also Read | Seven days, high stakes: Can India secure a trade deal before 7 August? How much money is the US raising from tariffs?

The tariffs imposed by Trump are ultimately paid by US companies that import goods from abroad. The impact of all this is being felt in the US and global economy in different ways, BBC reported.

Here's what the numbers reveal:

1. Average effective tariff rate 👍

The Budget Lab at Yale University estimates that as of 28 July 2025, the average effective tariff rate imposed by the US on goods imports stood at 18.2 per cent, the highest since 1934.

That was up from 2.4 per cent in 2024, before Trump returned to office for his second term as President.“After consumption shifts, the average tariff rate will be 17.3 per cent, the highest since 1935,” the Budget Lab reports.

Also Read | Trump signs order imposing up to 41% tariffs; India, Canada hit 2. Tariff revenues 👍

The rise in the average effective tariff rate signifies an increase in the US government's tariff revenues. In June 2025, tariff revenues were $28 billion, triple the monthly revenues seen in 2024, BBC cited official US data.

3. US Customs duties 👍

Trump tariffs brought with them a surge in the US customs duties. The monthly customs and certain excise taxes collected by the Department of Homeland Security in June 2025 were more than $25 billion, BBC reported.

Also Read | Donald Trump's tariff on India vs Pakistan 'deal' sparks hilarious meme fest 4. US government borrowing 👎

The Congressional Budget Office (CBO) estimated in June that the increase in tariff revenue would reduce cumulative US government borrowing in the 10 years to 2035 by $2.5 trillion. This estimate was based on the new US tariffs imposed between 6 January and 13 May 2025.

“That estimate accounts for how flows of US imports and exports would adjust in response to the tariffs imposed as of 13 May 2025,” CBO had stated.

5. Size of the US economy 👎

The CBO claimed that the tariffs would shrink the size of the US economy relative to how it would perform without them, in part because of tariffs imposed by other countries in response to the increases in US tariffs.

Also Read | 'Way better than expected. Must now lower rate': Trump as US economy rebounds 6. Federal deficit 👎

The CBO estimates that the changes in tariffs will reduce total federal deficits by $2.8 trillion.

7. US trade deficit 👍

A trade deficit is a situation in which the value of goods a country imports is greater than the value of goods it exports

While Trump's tariffs were intended to reduce the US trade deficit, the results seemed to be contrary. According to the BBC's estimate, the US trade deficit widened - and not fallen - after tariffs led to a surge in imports.

“It reached a record $162 billion in March 2025, before falling back to $86 billion in June,” the report claimed.

Also Read | Goods trade deficit narrows sharply to $18.78 bn in June

The report noted that“one of the standout impacts of Donald Trump's trade war, so far, has been to increase US goods imports”. This is because US firms stockpiled supplies in advance of tariffs being implemented to avoid being forced to pay the additional tax.

Experts, according to the BBC, believe that the Trump administration will still struggle to bring down the overall US trade deficit.

But why is this so? They argue that the deficit is primarily driven by structural imbalances within the US economy -persistent national spending in excess of national production - rather than unfair trade practices directed at America by other nations.

Also Read | Goods trade deficit widens to a five-month high of $26.42 billion in April 8. Inflation 👍

Inflation will increase by an annual average of 0.4 percentage points in 2025 and 2026, in CBO's estimation, reducing the purchasing power of households and businesses.

The official US inflation rate for June was 2.7 percent - up slightly from the 2.4 percent inflation figure for May – but still below the 3 percent rate in January.

Also Read | US inflation logs smallest annual rise in four years, core CPI up 2.8% YoY 9. US consumer prices 👍

Experts have warned that Trump's tariffs will push up US prices by making imports more expensive. According to the BBC, economists analysed the latest data and saw some signs that“Trump's tariffs are now starting to feed through to US consumer prices.”

In June, the prices of certain imported goods, such as major appliances, computers, sports equipment, books, and toys, increased.

Earlier, the Budget Lab claimed that the 2025 tariffs would“disproportionately affect” clothing and textiles, with consumers facing 39 per cent higher shoe prices and 37 per cent higher apparel prices in the short run.

Also Read | US consumer prices rose 2.7% in June amid rising Trump's tariff-driven costs

Shoes and apparel prices stay 18 per cent and 17 per cent higher in the long run, respectively.

Besides, researchers at Harvard University's Pricing Lab found that the price of imported goods into the US and domestic products affected by tariffs rose more rapidly in 2025 than the price of domestic goods that are not affected by tariffs.

These researchers are examining the effects of the 2025 tariff measures in real time using online data from four major US retailers.

10. Investments 👎

While Trump believes imposing tariffs would boost investments in America, CBO data showed that“reductions in investment and productivity stemming from higher tariffs will be partially offset by increases in resources available for private investment resulting from the reduction in federal borrowing.”

CBO estimates that, on net, real (inflation-adjusted) economic output in the United States will fall as a result.

Also Read | Donald Trump claims Tim Cook scrapped Apple's Mexico plants after meeting him, p 11. Labour Market Effect 👎

As per the Budget Lab, the unemployment rate may rise 0.4 percentage points by the end of 2025 and 0.7 percentage points by the end of 2026.“Payroll employment is 494,000 lower by the end of 2025,” it added.

This is also contrary to the claims that Trump made to justify his tariffs and trade war. He said earlier that the Make-in-America initiative would boost employment opportunities in the country.

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