Impact of Trump's Tariffs
US President Donald Trump has implemented tariffs as a central policy tool under the "Make America Great Again" agenda. However, these tariffs have not yielded the intended benefits and have rather adversely affected the US economy.
Understanding Tariffs
- Tariffs are taxes imposed by a domestic government on imported goods.
- They are intended to strengthen the domestic economy but typically have the opposite effect.
- Trump's belief that tariffs are paid by foreign citizens is incorrect; they are actually paid by US consumers and companies.
Economic Impacts on the US
- The US is the most negatively impacted by these tariffs.
- Real GDP growth is 0.5 percentage points lower than potential growth in 2025 and 2026.
- Long-term, the US GDP is projected to be 0.35 percentage points lower, translating to a loss of approximately $105 billion or Rs 9.3 lakh crore.
Effects on Other Economies
- China's GDP will see a persistent reduction of 0.18 percentage points due to the tariffs.
- Despite overall global adverse effects, the UK and European Union may emerge as beneficiaries due to their competitive trade stance and military alliances with the US.
- Among US neighbors, Mexico benefits from the tariffs due to its favorable trade relations, unlike Canada, which suffers partly due to less diplomatic synergy.