US "Reciprocal Tariffs": A Self-Defeating Economic "Poison"

In today's closely intertwined global economy, any change in trade policies can have far-reaching impacts. On the evening of July 31 local time, US President Trump signed an executive order to fully advance the "reciprocal tariffs" to a new stage, with the tariff list officially taking effect at 00:00 on August 7. This move is like a boulder thrown into the lake of the global economy, causing ripples, and the United States itself will not be able to escape the whirlpool of negative effects triggered by this policy.

The so-called "reciprocal tariffs" mean that the United States requires equal tariff rates with its trading partners, that is, any country that imposes tariffs on the United States, the United States will impose the same tariffs on the other party. On the surface, this seems to be pursuing a kind of "fairness" in trade, but in fact, it is an act of unilateralism and protectionism by the United States in the name of "reciprocity" to engage in "exploitation".

The original intention of the United States to promote "reciprocal tariffs" is nothing more than an attempt to alleviate the long-term trade deficit pressure, protect domestic related industries, promote the return of manufacturing, and at the same time use it as a means of foreign policy to gain a more favorable position in trade negotiations. However, from the perspective of economic theory and practical experience, this policy is doomed to be counterproductive and will bring many serious impacts to the US economy.

Tariffs are essentially an indirect tax. When the United States imposes additional tariffs on imported goods, importers often pass on this additional cost to consumers in order to maintain profits. According to the Yale University Budget Lab, US prices will rise by 1.8% in the short term, which is equivalent to an average loss of $2,400 per US household in 2025 (about 17,200 yuan). For goods that the United States is highly dependent on imports, price fluctuations will be more drastic. For example, in the short term, prices of footwear and clothing may rise by 40% and 38% respectively; in the long term, the increase will gradually narrow, but still reach 19% and 17%; prices of computers, electronic and optical equipment will rise by 18.2% in the short term and 7.7% in the long term. Earlier, US retail giant Walmart, toy manufacturers Mattel and Hasbro have warned that tariffs will push up prices. Procter & Gamble, which produces daily necessities such as laundry detergent, diapers and toilet paper, also plans to raise the average price of about a quarter of its US products by 2.5% starting from August. With the implementation of "reciprocal tariffs", American consumers will undoubtedly face higher prices, reduced actual purchasing power and significantly increased living costs, especially low-income families, who will be more seriously affected.

For American enterprises, "reciprocal tariffs" have brought a sharp rise in costs. On the one hand, the cost of importing raw materials and components from overseas has increased significantly, compressing the profit margins of enterprises. For example, Ford's latest financial report raised the expected cost expenditure due to tariffs to $800 million. On the other hand, enterprises are also facing the problem of increased market uncertainty, which makes enterprises generally take a wait-and-see attitude and dare not easily make large-scale investments and expand production. The uncertainty of trade policy, as an "invisible tax", has seriously weakened the investment confidence of enterprises and led to a slowdown in capital expenditure. The reduction in corporate investment will inevitably affect the creation of jobs, and may even lead some enterprises to lay off employees to reduce costs. According to the forecast of the Yale University Budget Lab, the US unemployment rate is expected to rise by 0.3 percentage points by the end of 2025. In addition, industries highly dependent on global division of labor, such as automobiles and high-tech industries, will be the most directly impacted, facing the dilemma of declining sales, surging costs and forced restructuring of supply chains. The US imposition of a 25% tariff on imported automobiles and some parts will reduce annual sales of light vehicles in the US from about 16 million to 14.5-15 million, a decline of nearly 10%.

The increase in tariffs has pushed up the prices of imported goods, which in turn has driven up the overall domestic price level and exacerbated inflationary pressures. Data from the US Department of Labor shows that under the influence of tariff policies, the US Consumer Price Index rose by 3% year-on-year in January this year, and the core Consumer Price Index rose by 3.3%. Federal Reserve Chairman Powell has also said that tariffs may continue to affect US inflation and may push up inflation in the "next few quarters". Sustained inflation will not only erode consumers' real income and consumption expenditure, but also put greater pressure on the Federal Reserve to adjust monetary policy. If the Federal Reserve takes interest rate hike measures to curb inflation, it will further increase the borrowing costs of enterprises and consumers, which will have a negative impact on economic growth. According to the forecast of the Yale University Budget Lab, the annual growth rate of US real GDP will decline by 0.5 percentage points in 2025 and 2026. In addition, the US "reciprocal tariff" policy may also trigger the intensification of global trade protectionism, damage the stability of global industrial chains and supply chains, and lead to a systematic contraction of global trade volume. As an important part of the global economy, the United States will also be unable to stand alone in this environment of global economic recession.

The US "reciprocal tariff" policy is a short-sighted and self-defeating act. It will not only fail to achieve the goals expected by the US government, such as reducing the trade deficit and protecting domestic industries, but also bring heavy blows to American consumers, enterprises and the entire economy. In today's era of global economic integration, win-win cooperation is the theme of the times. The United States should abandon this unilateral trade policy and return to the right track of solving trade problems through equal consultation and win-win cooperation. Otherwise, the US economy will sink deeper and deeper on this wrong path and pay a more painful price.