Trump’s 2018–2019 Tariffs Raised Input Costs and Hurt U.S. Exporters, American Economic Association Report

Tariffs are taxes imposed on imported goods, designed to protect domestic industries by making foreign products more expensive and less competitive.

The tariffs introduced by President Donald Trump in 2018-2019 were meant to protect American industries and reduce reliance on foreign goods. These protectionist trade initiatives were a central part of Trump’s “America First” economic policy, which aimed to reduce the U.S. trade deficit by moving away from multilateral free trade agreements in favor of bilateral trade deals.

While the goal was to help U.S. manufacturers, new research shows these tariffs caused unexpected problems, especially for exporters. The higher costs of importing raw materials hurt American companies trying to compete in global markets.

The most significant actions targeted imports from China. These measures escalated into a trade war, with tariffs imposed on a wide range of Chinese goods, including steel, aluminum, electronics, and consumer products. According to the American Economic Association (AEA), these tariffs acted like a hidden export tax of 2-4%, reducing the competitiveness of American goods overseas.

The tariffs caused major issues for U.S. exporters. Companies that needed imported parts and materials had to pay more to produce their goods. This reduced their profits and made their products less competitive globally. Some industries struggled so much that they had to cut back production or lay off workers.

The tariffs affected jobs in industries that depend on imported goods. Higher production costs led many companies to reduce their workforce or delay expansion. The overall economy also took a hit. Studies show that U.S. households faced higher prices, which lowered their spending power. The tariffs reduced U.S. economic growth by increasing costs for businesses and triggering retaliatory tariffs that hurt exports.

Another study by the Federal Reserve found that while a few U.S. industries initially benefited from protection, the overall damage outweighed the gains.

Trump’s 2018–2019 Tariffs Raised Input Costs and Hurt U.S. Exporters, American Economic Association Report — Average tariff rates in the U.S., 1821–2016

Trump’s tariffs are reminiscent of the Smoot-Hawley Tariff of 1930. That law raised taxes on thousands of imported goods during the Great Depression, aiming to protect U.S. jobs and industries. Instead, it triggered retaliation from other countries, causing global trade to collapse. The U.S. economy suffered, and unemployment rose sharply.

While Trump’s tariffs occurred under different circumstances, the historical lesson is clear: trade barriers can lead to unintended negative consequences in a global economy.

Looking ahead, President-elect Donald Trump has announced plans to impose new tariffs upon taking office on January 20, 2025. These proposed tariffs include a 10% tariff on all imports, a 25% tariff on goods from Mexico and Canada, and a 60% tariff on Chinese products.

Additionally, Trump has suggested a potential 100% tariff on countries within the BRICS alliance if they take actions undermining the U.S. dollar’s status as the global reserve currency.

Economists warn that such tariffs could lead to increased consumer prices in the U.S. and may provoke trade wars similar to those seen during Trump’s first term. It remains to be seen whether the lessons learned from past trade policies, such as the 2018-2019 tariffs, will shape the implementation of future measures.

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