Trump's tariffs and the consumer cost of liberation

Editor's note: U.S. President Donald Trump set a 10 percent baseline tariff across the board, with 60 countries hit with even higher rates on Wednesday. Will tariffs make America great again, as Trump promised? CGTN has introduced a five-part series – U.S., Biggest Loser from Tariffs – to analyze the impacts of the escalating trade war. The third article of the series is written by Jessica Durdu, who is a special commentator on current affairs for CGTN, a foreign affairs specialist and a PhD candidate in international relations at China Foreign Affairs University. The article reflects the author's opinions and not necessarily the views of CGTN.

Following U.S. President Donald Trump's new tariff policy on Wednesday, China announced a slew of countermeasures against the "reciprocal tariffs." For example, it will impose 34 percent reciprocal tariffs on U.S. products starting from April 10; another 11 U.S. firms have been added to the unreliable entity list; and so on.

By declaring the date a national turning point in economic sovereignty, Trump's rhetoric portrayed this move as a break from what he described as decades of American "kindness" being "ripped off by the world," despite the fact that the U.S. has been enjoying the benefits of all financial tools globally so far. What cannot be ignored is a complex economic reality that American consumers are already beginning to feel.

Stock markets reacted sharply in the hours following the announcement. As he finished his speech, financial screens across Wall Street were bleeding red, and within 24 hours, over $2 trillion was wiped out of the S&P 500 Index. As cabinet members attempted to justify the move on live television, consumer attention shifted to the bottom-right corners of TV Channels, where stock indices continued their rapid descent.

Former Greek Finance Minister Yanis Varoufakis defines the U.S.'s tariffs as the Trumpian Nixon Shock, which echoes the same isolationist instincts and is likely to fail for similar reasons. Like former President Richard Nixon, Trump seeks to shift blame for domestic economic woes onto foreign actors while ignoring the deeper structural challenges within the U.S. economy. But just as the Nixon Shock destabilized global markets and harmed long-term U.S. interests, Trump's tariffs risk repeating history. Except this time, the burden will fall squarely on American consumers.

It is essential to understand that tariffs are, by definition, a tax paid by importers, i.e., Americans, not foreign governments. These costs inevitably pass down the supply chain and land at the feet of everyday Americans.

According to former Vice President Mike Pence, the average U.S. household could face an additional $3,500 in annual expenses due to the new tariffs. iPhones, for example, which already carry a 20 percent tariff, will now be subject to an additional 34 percent as they are produced in China, pushing prices sharply upward. Vehicles assembled in North America may cost between $4,000 and $10,000 more.

In fact, this is not just about foreign-made goods. The domestic economy is deeply intertwined with global supply chains. Tariffs on raw materials and components imported from abroad increase production costs for U.S. manufacturers, who then pass these increases onto consumers. This means that even goods labeled "Made in the USA" will have inflated price tags. Moreover, healthcare, transportation and finance services will also become more costly.

The Federal Reserve, already walking a tightrope between inflation control and economic growth, now faces an even more difficult dilemma. While higher interest rates could theoretically curb tariff-induced inflation, they would also make loans for housing, cars and business investment more expensive, suppressing demand and slowing job creation.

Ironically, Trump's policy arrives at a time when the U.S. economy is already struggling with inflationary pressure, exacerbated by structural limitations in the capitalist model that has long underpinned U.S. prosperity.

Although the previous Biden-Harris administration has been widely criticized for failing to contain inflation and economic inequality, Trump's solution does not address these root problems. Instead, it imposes an artificial cost on the economy under the guise of patriotism and protectionism. As Vice President J.D. Vance put it in an interview, U.S. people will soon "have more money in your pocket" to "deal with the cost of inflation," a statement that neither reassures nor resolves the deeper issue of affordability.

Despite all the rhetorical flourishes about American strength and global fairness, the economic implications are stark. Consumer psychology is already shifting. Faced with higher prices, families are cutting discretionary spending, which in turn lowers aggregate demand, a key driver of economic growth. Low-income households will bear the heaviest burden, squeezed between rising living costs and stagnant wages. These changes ripple outward, impacting retail, manufacturing, logistics and services, ultimately threatening employment and GDP growth.

Moreover, the unpredictability of the Trump administration's economic direction further undermines public confidence. This inconsistency diminishes policy credibility and discourages long-term investment. Businesses cannot plan, hire, or expand in an environment where tariffs and the economic logic behind them can change overnight.

Ultimately, the so-called liberation day may prove costly for American consumers. Tariffs may rally political support among a segment of voters disillusioned with globalization, but they do not offer a viable path to consumer welfare. Instead of making America wealthy again, this policy may do the opposite by raising costs, stifling consumption, destabilizing markets and worsening the economic conditions it claims to correct.

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