Impact of Trump’s Tariffs: A Global Economic Shift

WASHINGTON (AP) — This week, President Donald Trump’s aggressive tariff policies have left a multitude of nations grappling with unexpected challenges. From smaller countries like Laos and Algeria to affluent trading partners such as Canada and Switzerland, all now face significant increases in the tariffs on goods they export to the United States starting August 7.

While a few nations have managed to negotiate terms that might appear favorable, it’s dubious whether anyone can truly claim victory, including the United States—the primary target of Trump’s trade war policies. “In many respects, everybody’s a loser here,” said Barry Appleton, co-director of the Center for International Law at New York Law School.

A New Economic Order Emerges

Just six months into his second term, Trump has dismantled the established global economic framework. The previous system, founded on mutual agreements and cooperative regulations, has been replaced by a unilateral approach where Trump dictates the rules, leveraging the economic power of the United States to impose penalties on those who refuse to accept one-sided trade deals. “The biggest winner is Trump,” noted Alan Wolff, a former U.S. trade official and deputy director-general at the World Trade Organization. “He bet that he could get other countries to the table on the basis of threats, and he succeeded—dramatically.”

The Catalyst: “Liberation Day”

The backdrop to these developments can be traced back to what Trump refers to as “Liberation Day”—April 2—when he unveiled plans for “reciprocal” tariffs of up to 50% on imports from countries where the U.S. has trade deficits, alongside a baseline tax of 10% on most other nations. By invoking a 1977 law declaring the trade deficit a national emergency, Trump has effectively circumvented Congress’s traditional role in determining taxes and tariffs, a move currently under judicial scrutiny.

Negotiations and Adjusted Tariffs

In the immediate aftermath of the announcement, financial markets reacted negatively, prompting Trump to suspend the reciprocal tariffs momentarily and allow room for negotiations. Numerous countries conceded to Trump’s demands, agreeing to pay considerably higher tariffs to continue accessing the substantial American market. For example:

• The United Kingdom accepted a hike to 10% tariffs from 1.3%—despite the U.S. running a trade surplus with the UK for nearly two decades.
• The European Union and Japan yielded to 15% tariffs, a significant increase but lower than the initially threatened rates of 30% and 25%, respectively.
• Countries like Pakistan, South Korea, Vietnam, and the Philippines also negotiated hefty tariffs.

Even for nations that managed to reduce their tariffs, current rates remain significantly higher than pre-Trump levels. For instance, Angola’s tariff decreased to 15% from 32% in April, but in 2022, it was under 1.5%.

Countries Facing Hefty Penalties

Conversely, nations that resisted capitulation or faced Trump’s discontent are experiencing more severe penalties. Laos, with an annual economic output of just $2,100 per person, now suffers a 40% tariff, while Algeria faces a 30% levy, underscoring the punitive nature of Trump’s tariffs on poorer nations.

Brazil is another casualty, slapped with a 50% import tax rooted in political grievances against former President Jair Bolsonaro. Canada’s 35% tariff arises partly from its stance on recognizing a Palestinian state, while Switzerland was hit with a staggering 39% tariff, exceeding the initial 31% proposed in April.

Legal Challenges Ahead

As the situation evolves, fortunes may shift if the tariffs are deemed illegal in court. Five American businesses and twelve U.S. states are challenging Trump’s authority under the 1977 law in the U.S. Court of International Trade. Earlier this year, the court ruled to block the tariffs, though the government could continue to collect them as the case unfolds, potentially reaching the Supreme Court.

The Domestic Consequences

Despite Trump’s characterization of tariffs as a tax on foreign goods, it is American import companies bearing the financial burden, which is ultimately passed onto consumers in the form of higher prices. Recent analyses by Goldman Sachs suggest that only one-fifth of rising tariff costs have been absorbed by overseas exporters, with the bulk impacting U.S. consumers and firms.

As a result, companies such as Walmart, Procter & Gamble, Ford, and others have already begun increasing prices on a range of goods, from sneakers to electronics. As Barry Appleton points out, “This is a consumption tax, so it disproportionately affects those who have lower incomes.”

A Shifting Economic Landscape

Truly, Trump’s trade war has seen a rise in the average U.S. tariff from 2.5% in early 2025 to 18.3%, marking the highest level since 1934. The Budget Lab at Yale estimates that this surge translates to an approximate $2,400 financial burden on the average American household. “The U.S. consumer is a big loser,” Wolff concludes.