The Tariff Situation In America And Why You Should Be Concerned

U.S. President Donald Trump announcing his new tariffs on April 2, 2025.

While there has been a long-standing debate about whether skipping your daily $7 coffee could someday save you enough money to buy a house or a car, this debate might not be relevant anymore. Why? Because everything from coffee prices to house down payments has soared, all because of America’s newly implemented tariffs. You might not think that international trade policy affects such basic things like your morning coffee, but these new tariffs are impacting every aspect of Americans’ lives. Since the 1800s, America’s economy has been the leader of the global market, with a whopping annual GDP per capita—the monetary value of goods and services produced in a country per person—of around $86,600. The U.S., on its own, contributes to around a quarter of the total global GDP and is a major exporter and importer. However, despite all of this success, the American economy has had its national trade deficit go up by $133.5 billion since 2024, which signifies a widening gap between the country’s exports and imports. In other words, the U.S. is continuing to spend more on foreign goods and services than it earns from exporting its domestic goods to other countries. 

This imbalance is largely due to an increase in imports driven by both businesses seeking manufacturing resources abroad and consumers indulging in foreign products for personal use. Meanwhile, the growth in overall export figures for the U.S. have been low comparatively. However, it’s important to note that being in a trade deficit isn’t necessarily always bad. Regardless, in response to this, President Donald Trump imposed high tariffs—taxes imposed by a government on imports, thus making these goods more expensive and incentivizing citizens to buy from domestic companies instead—on countries such as Mexico, Canada, and China. The reasoning behind this move was to not only hold these countries accountable for partially failing to keep their promises of halting illegal immigration and stopping the flow of drugs, but also to protect domestic industries, raise revenue, and most importantly, reduce the trade deficit. 

As of March 4, 2025, Canada and Mexico are to be taxed 25% on imports, with a 10% tariff on energy resources from Canada. Furthermore, a 10% duty on imports from China is being implemented (this is on top of the pre-existing baseline 10% tariff rate). These tariffs mean that products that we import from Mexico, China, and Canada, which include electronics, clothing, shoes, seafood, and coffee, will become far more expensive. 

While there are additional discussions around imposing a 25% tariff on European Union imports, no specific date has been set for this measure as of now. Thankfully, this means that essential pharmaceutical products, machinery, and cars—goods that we usually import from the European Union—will continue to be sold at their regular price. The fact that these policies were made by such an essential trading partner in the global economy means that they will have a significant impact on other economies. The rising tariff rate will strengthen the USD, significantly reducing both import and export transactions. While tariffs do increase tax revenue, the stacking of tariff upon tariff has the potential to affect imports in the long run. Imports into the U.S. could experience a massive drop, directly involving the exports of other countries. 

Given the United States’ integral role in global trade, the impacts of these tariffs have been disruptive around the world. One immediate impact of such high tariffs is the upward pressure they place on the US dollar (USD). As tariffs increase, the demand for USD will increase internationally, which will result in a short-term strengthening of the currency. However, this would be harmful in the long run for America, as it would inadvertently reduce the competitiveness of U.S. goods abroad. This is because a stronger USD, relative to other currencies, will make American exports more expensive and thus less attractive to foreign buyers. 

These tariffs have also impacted international companies heavily. Many foreign exporters who relied on the American market for sales are beginning to mourn the loss of their international customers. Consequently, they have begun a slow shift towards different markets to sell their goods; however, to their disadvantage, these alternative markets are not as good and large as the U.S. market. Domestically, on the other hand, companies have taken a hit as well. The tariffs drastically reduced investor confidence in the American economy, and the stock market ended up crashing, with the S&P 500 losing 10% of its value and many individual companies losing even more.

Adding on, Trump’s tariffs have not only impacted the world economically, but they’ve also sparked political tensions and rivalries. Countries like Canada and China have retaliated by imposing their own tariffs on U.S. exports. For example, when the tariffs on China began, China immediately countered them with strengthened policies for tariffs on American coal, natural gas, crude oil, and cars. Similarly, Canada has responded with a 25% tariff on American goods. So far, these retaliatory tariffs have affected close to $30 billion worth of American exports to Canada! This response will have serious consequences for both countries, as well as for the broader North American economy. 

Mexico, another major country on the North American continent, has begun defensively protecting its finances in response to America's tariffs. Despite Mexico receiving the sharpest hit due to its dependency on U.S. goods, its government has disclosed no further details on how it plans to handle this situation or what American products it intends to target with possible retaliatory measures. 

While this tariff war began as a political threat to defend borders and somehow improve the American economy, a new set of questions and problems has arisen. This includes stuff like where the impacted countries should now import from or how they should deal with one of their biggest, if not their biggest, trading partners turning against them. As the trade war between the largest economic powers in the world continues, other seemingly “spectator” countries have begun to feel the political and financial damage. On April 9th of this year, Trump placed a 90-day pause on the high tariffs on many countries, with only a 10% baseline tariff still in place. However, this is only temporary, and although the negative effects of the tariffs have slightly slowed down, they will come rushing back soon enough. A new tariff war has only just started, and any move that comes next could rattle the world.