Trade Wars and Tariff Tales: Making Sense of Trump’s Economic Gambit

You remember that point in time when your dad would call out that he is going to go back home if you and your siblings didn’t stop quarreling in the backseat? It is something similar, but on a global scale, that happened with the world trade, where the world economy was the vehicle and the one who held patients was President Trump, and he was doing so by threatening other nations with tariffs.
To be clear about the whole “trade war” thing, let’s take a look at the concept in an easy-to-understand manner (I guarantee no economics degree is needed!).

What Exactly was the Trump Trade War?

Beginning with the year 2018, President Trump has initiated what some referred to as a “trade war” by the imposition of heavy tariffs on imported goods from various countries—mainly from the People’s Republic of China. Tariffs work, in layman’s terms, like a toll booth on the highway, where Trump was telling the Chinese that, “If you’re going to trade here, you have to pay 25% more on tax, please.”

What led him to this, after all? In Trump’s opinion, the US was actually being cheated by the other countries. In his tweets (remember them from before-X days?), he said, “When a country is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.”

Narrator voice: They were neither good nor easy to win.

The China Showdown: More Than Just Soybeans

The largest realm of war being with China—our romantic and enemy at the same time in the economic sphere. First of all, the relationship is quite complicated, not unlike the “it’s complicated” Facebook status in 2010.

President Trump imposed tariffs on China for everything from steel to toilet paper. The interesting thing was the Chinese response because they were not going to sit idly by and just take it. China put tariffs on US exports, including but not limited to soybeans, cars and whiskey.

All of a sudden the farmers in America, who up to this point were exporting their products to China, were left with a surplus of soybeans in their possession. In a way, it could be amusing where you have spent a massive amount of effort preparing food for your guests, just to find out they had to cancel all of a sudden—obviously, the financial stakes were only a bit higher in this situation.

Real Talk – Who Really Foots the Bill for Tariffs?

You might be surprised by this part. “China is paying billions in tariffs to the US” is a false statement, of course; however, tariffs are actually paid, but not quite the way it is usually described.

The collective facepalm of the economists could be heard all over the country when Trump tweeted “Tariffs are NOW being paid to the United States by China.” That’s not the truth, though.
So, the real thing is the US government collects the tariffs, but those American businesses, which import the goods are the ones who foot the bill not China.

In many cases, American consumers have to pay the cost of these imported Chinese goods plus the tariff imposed. Yes, you’re correct – you pretty much just taxed yourself the extra money that you didn’t need to.
That’s how it was supposed to be like, and then you discovered you also had to pay the amplified rent. Oops.

Winners and Losers: Kitchen Table Edition

First of all, how did the game end? Who were the actual winners and losers?
The winners were the following:
Some US steel and aluminum producers had less competition from foreign industries that were the winners
The US Treasury (they collected those tariff dollars)
Politicians who could appear “tough on China”
Companies that already made products entirely in the US
Losers:
American farmers (China bought agricultural products somewhere else)
US manufacturers who needed imported parts (due to the sudden increase in the cost!)
American consumers paying higher prices.

Your favorite gadgets that suddenly cost more

A factory worker in Wisconsin shared with me, to quote, “They said the tariffs would bring jobs back, but all I got was a more expensive washing machine.” That pretty much sums it up for many Americans.

Plot Twist: The Phase One Deal

Almost two years of trade quarrels later, Trump and China got to what they claimed a “Phase One” trade deal in January 2020. China said they would raise their American goods purchases by $200 billion, and the US would slash some tariffs in return.

But, did China buy as many goods as they had committed? Just as well as people usually keep their New Year’s resolutions, which is not quite. COVID started, and everyone found much bigger problems than soybean quotas.

The Tariff Hangover

Turn the calendar to today, and what do you see? Not so many of those tariffs have been lifted. Like the tattoo you may have gotten in your college years, they are the economic equivalent of that—nowhere to know where and how to hide it really.

The average American home had a total extra payment of $500 to $1,000 per annum in higher prices only from these tariffs. This amount of money gone can be a family vacation to the water park, a few months of streaming services, or a lot of iced coffees.

What Are the Main Points of Trump’s Trade War Policy?

It’s almost impossible to find one learning from this global economics game. Next to the global game of economics, rubbing the sleep out of your eyes and fitting a king-size mattress into a standard doorway is so simple and kids can do it (we have all been there, right?).
From which the most important lessons can be learned are as follows:

Global logistics are highly interdependent
Levies often ruin the situation of the country that imposes them
Trade deals are less “Art of the Deal” and more “Patience of a Saint”
Economic decisions have consequential effects for real life people

What Were the Outcomes of the War?

The decision is with you here. Trump mainly complained about China’s trade deficit during his presidency but in the meantime, he was one of its contributors to the growth. Although manufacturing jobs experienced some growth, it was not something out of the ordinary. And the consumers definitely had to pay extra for the goods.

On the other hand, the trade war led to a world discussion about China’s trade practices, like intellectual property theft, and its economic influence. Maybe, when you want to draw people’s attention to the situation, you need to take some radical steps.

Further Trump’s Trade War: The 2025 Repeat

Let’s see how much money we will manage to keep in our wallets because it seems that Trump’s trade policy is going to have a sequel in 2025! The President of the United States, after his return to the White House in January, showed how eager he is to make a comeback with his trade policy.

When he was still in his first 100 days of his second presidency Trump unleashed a new set of tariffs, this time even more extensive. The administration is trying to introduce a 10% import duty that applies to almost all the goods and additionally, there are specific products that could be taxed up to 60%.

“America First economics is back,” Trump declared in a speech from the Rose Garden. “And this time, we’re going larger.”

What are the distinguishing features of Trade War 2.0? The primary reason is the fact that after 2018, the world economy has been substantially transformed. The Chinese have already started reorganizing their supply chains because of the previous tariffs and the COVID-19 situation. The main way to those companies are redefining the terms of the current production situation is referred to as “friend-shoring”.

Sarah Chen, who runs a small electronics business in Michigan, told me: “We had just started changing the procurement from China to Vietnam after the first trade war, and now we are interrupting the process underway one more time because of the new situation. It’s like we’re being jerked back and forth by the changes in the economy.”

The sectors present a different picture than we could see last time. Some of the US-based businesses which have become the first-round beneficiaries of the tariffs are now expressing their joy. However, retailers and consumer goods manufacturers are warning consumers that there will be significant price increases in the stores in the near future.

The market has shown a mixed reaction, making traditional manufacturing stocks go high, while some other business fields such as retail and tech companies have felt the most of the fall of the shares in this current period which is expended too heavily on international supply chains.

Although we are only in the initial stage of the 2.0 Trade War, the economists have already made the right move in revising upward their inflation predictions. Is it going to be this time that the accomplishment of this round of the tariffs that couldn’t be done by the previous one will occur? It’s too soon to tell.

Where Do We Go From Here?

It is obvious to us that the problems of international trade which have been maintained through years of business relationships can’t be solved in a day, and the economy continues to evolve.
My sense is that the key questions still revolve around the following issues:

How can we participate in the world market, while not shooting ourselves in the foot, or even do better in business performance? Is it feasible for us to take advantage of American industries without causing their products to be more expensive to U.S. families? And if such a situation arises where American consumers decide that they are willing to pay more, are they agreeing to what is being suggested by economic nationalism?

What is your opinion? Do you think the original trade war was a good thing worth enduring economic instability, and what are your feelings about its 2025 sequel? Just share your thoughts in the comments and let me know what you think about this economic rollercoaster—I’m really interested in your view!

FAQ: Trump Trade War Quick Hits
Q: Did the trade war bring manufacturing jobs back to America?
A: Yes, some, though not to the extent previously indicated. Official sources say that most gains turned out to be quite moderate in the best case scenario.
Q: Are we still in a trade war?
A: Totally, positively, yes! Now, in 2025, President Trump’s “Trade War 2.0” has started. The renewed tariffs are broadened and consist of a proposed universal 10% tariff on all imports and ranging all the way up to 60% on Chinese goods.
Q: Did China change its trade practices because of the trade war?
A: The truth is, there have been some extents to which China made changes in the process of being involved, the main among them being the issue of intellectual property rights being thus recognized. There is still a lot of doubts about the negotiating and dealing style present there.
Q: What happened to farmers hurt by the trade war?
A: Farmers by the trade war-related plight were relieved with an administration package of about $28 billion—over two times higher than the auto industry rescue by the taxpayers during the 2008 financial crisis.