President Donald Trump holds a signed executive order after delivering remarks on reciprocal tariffs during an event in the Rose Garden on April 2, 2025.
Saul Loeb | Afp | Getty Images
President Donald Trump has cited a host of reasons to impose steep new tariffs on U.S. trading partners. Some of the justifications are at odds with each other, economists said.
Trump on Wednesday announced a new 10% tariff on all imports, plus additional levies for major exporters including China, India, Vietnam and the European Union.
The duties, when combined with others already announced earlier this year, push the average effective U.S. tariff rate from 2.3% in 2024 to about 24% — the highest in 125 years, according to a note Wednesday from Capital Economics.
Trump’s various rationales for tariffs
Ever since Trump began his second term on a pledge to reorient global trade, he has offered many different rationales for imposing tariffs. Here are some of them:
Tariffs will restore U.S. manufacturing. Trump has long argued that protectionist trade policies are the only way to preserve and grow American factory jobs. Economists broadly disagree. “This trade war is not an incentive to come back to the United States,” Andre C. Winters, founder of supply chain consultancy HudsonWinters, told CNBC. “Companies will look to other countries” with lower tariffs and labor costs before they return their manufacturing to the U.S., Winters said.The revenue collected by tariffing importers — who pass the costs on to consumers — will help offset Trump’s planned tax cuts. According to a Yale University Budget Lab analysis, all tariffs to date would raise $2.5 trillion over a decade, if they remain in place. A Republican tax-cut package is expected to cost at least $4 trillion over a decade.Tariff revenue will help pay down the national debt, a claim Trump repeated Wednesday at the White House. Tariffs and the threat of tariffs will provide Trump with leverage to force other countries to lower their own trade barriers to U.S. goods.Tariffs can help cut down on fentanyl deaths in the United States by pressuring Canada and Mexico to stop cross-border drug trafficking.Trump says tariffs can solve what he calls the problem of a U.S. defense-industrial base that has become “dependent on foreign adversaries.”Tariffs can reduce trade deficits such as the one the U.S. runs with China, which hit around $295 billion in 2024. Some of the nations that were hit hard with new tariffs actually run a trade surplus with the U.S., such as Australia, with which the U.S. had an $18 billion surplus in 2024.Tariffs will stimulate the U.S. economy. Trump and his trade advisors argue that tariffs force U.S. buyers to seek out domestic products because foreign products become too expensive, thereby growing American jobs and increasing prosperity. But economists argue that using tariffs to boost jobs in protected industries such as steel harms all the sectors that need to buy steel to manufacture their products. On a net basis, higher costs for U.S. goods may cost American jobs.
Why tariffs come with ‘trade-offs’
However, “there are trade-offs” with tariffs, Douglas Irwin, an economics professor at Dartmouth College and trade historian, said on a webinar earlier this year.
For example, the result of protectionist policies that aim to restrict foreign imports in order to boost domestic industry is that the U.S. wouldn’t raise much revenue from tariffs, he said.
Conversely, trying to maximize tariff revenue means the U.S. wouldn’t be restricting imports, Irwin said.
Trump also pitched tariffs as a way to lower prices for consumers, the result of more U.S. production and stronger competition.
However, economists broadly disagree with that claim, at least for prices in the short term. The average household will lose $2,400 of purchasing power due to the April 2 tariffs, and about $3,800 with all tariffs combined, according to the Yale University Budget Lab.
