In less than a week, President Donald Trump’s tariffs have already created economic chaos in the US and abroad.
On Wednesday, he announced a minimum 10 percent tariff on almost all imports, with dozens of countries facing far higher rates.
The S&P 500 has plunged almost 10 percent in response as of Monday, hitting nearly two-thirds of Americans who hold stock especially hard.
Some countries, including China, have issued retaliatory measures. Other US trading partners, including Japan, are seeking to negotiate with the Trump administration.
But if the tariffs stay in place, US consumers are expected to soon pay more for everything from cars to sneakers to groceries as a result.
Industries from car manufacturing to pharmaceuticals have been scrambling to respond. A producer of the Chrysler Pacifica minivan and Dodge’s electric Charger Daytona has already temporarily closed one of its factories in Canada, just across the border from Detroit. Whirlpool also announced layoffs Thursday of more than 650 American workers in Iowa, citing economic conditions in the US.
Amid the economic uncertainty created by the tariffs, what is clear is that a global trade war may be just beginning. Here are some of your key questions about the tariffs, answered.
What happened the last time the US imposed tariffs on this scale?
The last time the US imposed tariffs similar to those issued by Trump was at the outset of the Great Depression.
The Smoot-Hawley tariffs were passed in 1930 against the advice of many economists. They raised the average tariff by 20 percent. The goal was to protect American farmers and businesses that had ramped up production during World War I, only to see prices collapse when European manufacturing ramped back up thereafter.
However, the tariffs ended up triggering retaliatory tariffs from European trading partners, causing international trade to decrease significantly. Between the United States and Europe alone, trade fell by about two-thirds between 1929 and 1932, deepening the depression.
The tariffs were ultimately repealed in 1934. But they had more lasting geopolitical impacts: Some historians speculate that the resulting economic fallout globally helped contribute to the rise of Adolf Hitler in Germany.
What does Trump actually hope to achieve by this?
Trump has celebrated Wednesday, the day that the tariffs were implemented, as “Liberation Day.” That’s because he sees the tariffs as a “declaration of economic independence” and a means of reviving American manufacturing, as he said during a Rose Garden event on Wednesday.
“Our country and its taxpayers have been ripped off for more than 50 years, but this is not going to happen anymore,” he said. “We are finally putting America first.”
His hope is that, in making it more expensive to import foreign goods, companies will seek to invest in bringing their production to the US, therefore bringing prices down for American consumers in the long run. He also claims that the tariffs will stop other countries from “cheating” America with trade imbalances.
Economists don’t think that the tariffs will achieve those goals. The Economist called the tariffs the “most profound, harmful and unnecessary economic error in the modern era,” based on an “utterly deluded” understanding of economics and history.
For one, the formula used to determine the “reciprocal” tariffs involves dividing a country’s trade surplus with the US by its total exports. That number was then divided in half to arrive at the tariff rate.
That’s not the more tailored approach that the administration had previously floated, which would have taken into account a complex array of factors. It also ignores the fact that many nations have a trade surplus with the US because they are relatively poor and cannot afford to buy American-made goods.
Do Americans support this move?
Trump’s approval ratings have fallen to their lowest point since he assumed office amid the tariff furor. While Trump’s immigration policies remain relatively popular, buoying his overall approval ratings, that’s not the case when it comes to his economic policies.
Polls conducted over the last month indicate that between 37 and 45 percent of Americans approve of Trump’s performance on the economy. A majority of Americans said in a March 27 CBS News/YouGov poll that Trump is focusing too much on tariffs and not enough on reducing prices. A separate YouGov poll conducted shortly after Trump’s tariff announcement found that a majority of Americans disapproved of the tariffs, 40 percent strongly so.
Which products will be most affected?
Perhaps a more apt question is what products won’t be affected, given that even many US manufacturers rely on imported goods and are expected to pass on increased costs to American consumers.
Trump has announced a 25 percent tariff on all foreign-assembled cars and plans to introduce additional tariffs on certain car parts, including engines and transmissions.
Prices of consumer electronics are also expected to increase significantly, given that countries hit hard by the tariffs — China, Taiwan, and South Korea — are major producers of TVs, cellphones, and more.
Clothing and shoes will also likely become more expensive since China, Vietnam, and Bangladesh — all major exporters — now face steep tariffs.
What does this mean for the US and global economy?
The White House had warned that Trump’s tariffs would inflict short-term pain — and that’s what America is getting, without any assurance that there will be a payoff in the long run.
The US dollar has declined in value against other benchmark currencies. Economists project that the tariffs will lead to a $3,789 decline in disposable income for the average US household, as well as a 0.87 percent decline in American economic growth in 2025. JP Morgan has raised its odds of a recession from 30 percent to 60 percent since the beginning of the year amid concerns about the impact of tariffs.
The global economy is also reeling, with stock indices dropping worldwide in recent days. Few countries will suffer as much as Cambodia and Vietnam, where many American companies, from Nike to Apple, have moved manufacturing. Notably, Trump did not hit Mexico or Canada with additional tariffs beyond those announced earlier this year.
Why were Russia and North Korea exempted?
Russia and North Korea were also not on the list of countries facing additional tariffs, and exactly why is a bit of a mystery.
The White House has reportedly argued that they are “already facing extremely high tariffs, and our previously imposed sanctions preclude any meaningful trade with these countries.”
However, other countries facing significant US sanctions, including Venezuela, were hit with additional tariffs.
Also, the US still trades significantly more with Russia than with other countries that were not spared, some of which are remote islands. After Russia’s 2021 invasion of Ukraine, the US imposed economic sanctions on Russia that caused trade between the two countries to fall from about $35 billion to $3.5 billion last year. Russia is currently in talks to lift those sanctions as part of an agreement to end the war in Ukraine.
Update, April 8, 6:30 am ET: This story was originally published on April 4 has been updated with additional information on Trump’s tariffs.
