An Economic Analysis of President Trump’s New Tariff Policy and The Impact on American Consumers

Emily Bracht

As President Trump makes his return to the White House, the U.S. is once again using tariffs as a major part of its economic policy reform in 2025. How will the 2025 tariffs differ from those implemented in 2018? Why is Trump restoring his stringent tariff policy? Who will feel the impact from these drastic administration changes?

Tariffs are taxes imposed on foreign goods imported into the U.S., typically calculated as a percentage of the imported product’s value.[1] Foreign importing companies are responsible for paying these taxes to the U.S. government.[2] Ultimately, these companies can choose to absorb the cost themselves or reallocate it to consumers by raising the prices of their products.[3] While the power to implement tariffs is traditionally given to Congress, within recent years Congress has expanded the scope of executive power under the Constitution to allow the president to enact tariff policy.[4]

Tariffs were a key feature of President Trump’s economic policy in his first term.[5] He initially imposed tariffs on washing machines and solar panels, primarily affecting China and South Korea.[6] Later, Trump also imposed broader tariffs on steel and aluminum from most countries.[7] These policy changes were deemed constitutional based on the president’s authority to address unfair trade practices under Section 301 of the Trade Act of 1974 and national security concerns under Section 232 of the Trade Expansion Act of 1962.[8]

With Trump’s return to the White House, his administration has reintroduced and expanded tariffs on foreign imports.[9] Between February and early April 2025, President Trump implemented a series of escalated tariff policies that significantly reshaped U.S trade.[10] These actions were made in an attempt to follow through on Trump’s campaign promises to revive domestic manufacturing and reduce U.S. reliance on foreign imports as a part of a broader effort to strengthen the U.S. economy.[11]

President Trump ultimately relied on two factors in determining the tariff rate: (1) the trade deficit of each country and (2) the total value of U.S exports.[12] The new wave of tariffs began with a 10% levy on Chinese goods and an up to 25% tariff on products from Mexico and Canada.[13] As before, Trump cited national security and economic concerns as the main justifications for these strong actions.[14]Although some of the trade policies went through a series of negotiations and adjustments, tariff rates steadily increased, expanding to include steel, aluminum, automobiles, and energy-related imports.[15] In response to the heightened tariffs on foreign exports, key U.S. trading partners–including China, Canada, and the European Union–imposed retaliatory tariffs, both straining foreign economic relations and increasing costs of imported goods in the U.S.[16]

Historically, the S&P 500 often drops in response to new tariff announcements because investors anticipate higher costs for businesses and potential disruptions to global trade as a result.[17] During Trump’s previous term, the S&P 500 dropped by 5% on the days when the U.S. announced new tariffs, and 7% on days when other countries announced retaliatory policies.[18] After the Trump administration’s new tariffs we announced this week, the S&P 500 recorded its worst weekly performance since the pandemic-related crash in March 2020.[19] This dramatic drop has had harsh repercussions on the economy, with 486 of the 500 companies within the S&P 500 index experiencing a decline in their stock value.[20]

The stock market's sharp reaction to the new tariffs may leave everyday consumers wondering how these policies will affect their daily lives. One thing is clear: essentials, like eggs, are unlikely to get any cheaper anytime soon.[21] Prices on perishable goods will likely rise first due to their frequent need for replenishment.[22] In the coming weeks, products such as clothing, household appliances, and electronics will likely experience a price increase as well.[23] Homebuyers are also likely to feel the impact of the Trump administration’s policy, as new taxes on building materials will likely drive up the cost of purchasing a home.[24] As a result of all of these price increases, this new regime of tariffs are likely to curb consumer spending and slow economic growth.[25]

Ultimately, the goal with implementing these tariff measures is to narrow the gap between the value of the U.S. imports and exports, with a strong emphasis on promoting “Made in the USA” products.[26] However, data indicates that the U.S. economy is not prepared for a shift to large-scale manufacturing and the U.S. would likely require years to expand its production capacity.[27]

Whether these tariffs are successful, or the full scope of the retaliation is still yet to be seen, it is undeniable President Trump has made a huge impact on foreign trade policy in his first months in office.

[1] Jennifer Clarke, What are tariffs and why is Trump using them?, BBC, (Apr. 4, 2025), https://www.bbc.com/news/articles/cn93e12rypgo.

[2] Id.

[3] Id.

[4] Scott Bomboy, How Congress delegates its tariff powers to the president, National Constitution Center, (Apr. 2, 2025), https://constitutioncenter.org/blog/how-congress-delegates-its-tariff-powers-to-the-president.

[5] Ewan Palmer, How Donald Trump’s New Tariffs Compare to His First Term, Newsweek, (Apr. 3, 2025, 1:40 PM), https://www.newsweek.com/donald-trump-tariffs-compare-first-term-2054722.

[6] Id.

[7] Id.

[8] Scott Bomboy, How Congress delegates its tariff powers to the president, National Constitution Center, (Apr. 2, 2025), https://constitutioncenter.org/blog/how-congress-delegates-its-tariff-powers-to-the-president.

[9] Jennifer Clarke, What are tariffs and why is Trump using them?, BBC, (Apr. 4, 2025), https://www.bbc.com/news/articles/cn93e12rypgo.

[10] Wyatte Grantham-Philips, A timeline of Trump’s tariff actions so far, PBS News, (Apr. 4, 2025, 4:29 PM EDT), https://www.pbs.org/newshour/economy/a-timeline-of-trumps-tariff-actions-so-far.

[11] Natalie Allison, Jeff Stein, Cat Zakrzewski, & Michael Birnbaum, Inside President Trump’s whirlwind decision to upend global trade, The Wash. Post, (Apr. 4, 2025, 12:23 PM EDT), https://www.washingtonpost.com/politics/2025/04/04/trump-tariffs-reason-advisers/.

[12] Id.

[13] Wyatte Grantham-Philips, A timeline of Trump’s tariff actions so far, PBS News, (Apr. 4, 2025, 4:29 PM EDT), https://www.pbs.org/newshour/economy/a-timeline-of-trumps-tariff-actions-so-far.

[14] Shannon Pettypiece and Rob Wile, Here’s what to know about Trump’s tariff announcement, NBC News, (Apr. 2, 2025, 5:00 AM EDT), https://www.nbcnews.com/politics/economics/need-know-ahead-trumps-tariff-announcement-rcna198985.

[15] Wyatte Grantham-Philips, A timeline of Trump’s tariff actions so far, PBS News, (Apr. 4, 2025, 4:29 PM EDT), https://www.pbs.org/newshour/economy/a-timeline-of-trumps-tariff-actions-so-far.

[16] Id.

[17] How tariffs are forecast to affect U.S. stocks, Goldman Sachs, (Feb. 7, 2025), https://www.goldmansachs.com/insights/articles/how-tariffs-are-forecast-to-affect-us-stocks.

[18] Id.

[19] Stan Choe, Markets plunge with S&P 500 down 6% and Dow down 2,200 after Chine retaliates against Trump tariffs, Associated Press, (Apr. 4, 2025, 6:16 PM EDT), https://apnews.com/article/market-rates-trump-tariffs-d86db525c370e9da834e6dfb76e23b86.

[20] Id.

[21] Aimee Picchi, Wholesale egg prices are falling. Will consumers see some relief?, CBS News, (Apr. 4, 2025, 6:00 PM EDT), https://www.cbsnews.com/news/have-egg-prices-dropped-eggs-trump-tariffs/.

[22] Wyatte Grantham-Philips & Cora Lewis, How Trump’s latest tariffs could affect your personal spending, PBS News, (Apr. 4, 2025, 12:10 PM EDT), https://www.pbs.org/newshour/nation/how-trumps-latest-tariffs-could-affect-your-personal-spending.

[23] Id.

[24] Id.

[25] The impact of Trump’s Tariffs: A Comprehensive Analysis, CliftonLarsonAllen LLP, (Mar. 11, 2025), https://www.claconnect.com/en/resources/articles/25/the-impact-of-trumps-tariffs-a-comprehensive-analysis.

[26] Jennifer Clarke, What are tariffs and why is Trump using them?, BBC, (Apr. 4, 2025), https://www.bbc.com/news/articles/cn93e12rypgo.

[27] Jasmine Cui, The White House is using tariffs to restore manufacturing. Data suggests it will take time., NBC News, (Apr. 4, 2025, 11:19 AM EDT), https://www.nbcnews.com/data-graphics/trump-tariffs-manufacturing-us-business-jobs-economy-rcna199721.