Trump Tariff War

Trump’s Tariff War: How Taxes on Imports Leverage Global Trade Deals

Ashkan Kamyab

18 May 2025 — 9 min read

What Is Trump’s Tariff War?

Trump’s tariff war refers to his aggressive use of tariffs—taxes imposed on imported goods—to reshape U.S. trade relationships, reduce trade deficits, and boost domestic manufacturing. Starting in his first term (2017–2021) and escalating in his second term (2025–present), Trump has imposed or threatened tariffs on major trading partners like China, Canada, Mexico, the European Union, and others. These tariffs are often justified by citing national security, economic imbalances, or issues like illegal immigration and drug trafficking (e.g., fentanyl).

Key Features of the Tariff War:

Universal and Reciprocal Tariffs: In 2025, Trump introduced a 10% baseline tariff on all imports, with higher “reciprocal” tariffs (up to 50% or more) targeting countries with trade barriers against U.S. goods. For example, if India imposes a 70% tariff on U.S. cars, Trump might match or exceed that rate on Indian imports.
Sector-Specific Tariffs: Tariffs on specific goods like steel (25%), aluminum (25%), and autos (up to 25%) aim to protect U.S. industries.
Fentanyl and Immigration Focus: Trump has imposed tariffs (e.g., 25% on Canada and Mexico, 20% on China) tied to non-trade issues, like curbing fentanyl smuggling or illegal border crossings, using trade as leverage for broader policy goals.
Dynamic Implementation: Tariffs are often announced, paused, or adjusted to create pressure or reward compliance. For instance, Trump paused reciprocal tariffs for 90 days (except for China) on April 9, 2025, and later reduced China’s tariffs from 145% to 30% for negotiations.

Why Call It a “War”?
The term “tariff war” reflects the tit-for-tat escalation where targeted countries retaliate with their own tariffs (e.g., China’s 125% tariffs on U.S. goods, Canada’s 25% on U.S. vehicles). This creates economic friction, disrupts global supply chains, and raises fears of a broader trade war or recession.

Why Does Trump Use Tariffs?

Trump’s tariff strategy is rooted in his “America First” philosophy, which prioritizes U.S. economic and security interests. He views tariffs as a multi-purpose tool to address what he sees as unfair trade practices and geopolitical weaknesses. Here’s why he leans on them:

Reduce Trade Deficits: The U.S. had a $1 trillion goods trade deficit in 2023, with large imbalances favoring countries like China ($440 billion imports vs. $145 billion exports). Trump argues that tariffs make foreign goods more expensive, encouraging U.S. consumers to buy American-made products, thus narrowing the deficit.
Protect Domestic Industries: Tariffs shield U.S. manufacturers (e.g., steel, auto) from cheaper foreign competition, aiming to revive jobs and production. For example, 25% steel tariffs in March 2025 aimed to bolster U.S. producers against global oversupply.
National Security and Leverage: Trump ties tariffs to issues like fentanyl trafficking or border security, using economic pressure to force policy changes. He’s also used tariffs to counter perceived currency manipulation or high foreign tariffs (e.g., India’s 80% on rice vs. U.S.’s 2.7%).
Negotiation Tactic: Tariffs are a “stick” to bring countries to the negotiating table, where Trump seeks better trade terms, increased U.S. exports, or concessions on non-trade issues. He’s described tariffs as giving the U.S. “great power to negotiate.”

How Do Tariffs Help Trump Leverage Trade Negotiations?

Trump’s tariffs work like a high-stakes poker game: he raises the stakes with tariffs to pressure other countries into offering concessions, often pausing or reducing tariffs as a reward for compliance. This strategy exploits the U.S.’s economic dominance—its market is critical for many countries’ exports, giving Trump leverage. Here’s how it plays out:

Creating Economic Pain to Force Talks:
- Tariffs increase costs for foreign exporters, who pass them to U.S. consumers or absorb losses, hurting their economies. For example, China’s exports to the U.S. ($440 billion in 2024) are projected to drop 77% if high tariffs persist, threatening jobs and growth.
- This pain pushes countries to negotiate. In May 2025, China agreed to talks in Geneva after Trump’s 145% tariffs disrupted its economy, leading to factory closures and job losses.
- Example: Vietnam, facing a 46% tariff, vowed to buy more U.S. goods and signed a trade deal to reduce tariffs, showing how pressure leads to concessions.
Using Tariffs as a Bargaining Chip:
- Trump often announces tariffs, then pauses or exempts them to reward cooperation. On April 9, 2025, he paused reciprocal tariffs for 90 days for all countries except China, signaling openness to deals.
- The U.S.-UK deal (May 8, 2025) reduced auto tariffs from 25% to 10% for 100,000 UK vehicles and eliminated steel/aluminum tariffs, showing how tariffs can be traded for mutual reductions.
- With China, Trump cut tariffs from 145% to 30% (May 12, 2025) for a 90-day negotiation period, securing China’s agreement to lower its tariffs to 10% and suspend non-tariff barriers, like rare earth export restrictions.
Exploiting U.S. Market Power:
- The U.S. is the world’s largest consumer market, and access to it is vital for countries like Canada (67% of GDP from trade), Mexico (73%), and China (37%). Trump uses this dependency to demand better terms.
- For instance, India, facing reciprocal tariffs affecting 87% of its $66 billion U.S. exports, is negotiating to double bilateral trade to $500 billion by 2030 to avoid losses.
- Allies like Japan and South Korea have sent negotiators to Washington to secure exemptions, fearing economic fallout from tariffs on autos and electronics.
Linking Trade to Non-Trade Issues:
- Trump uses tariffs to pressure countries on issues beyond trade, like immigration or drug policy. In February 2025, he imposed 25% tariffs on Canada and Mexico, citing fentanyl and illegal immigration, leading to temporary exemptions when they tightened border controls.
- This tactic forces countries to address U.S. priorities to avoid economic damage, enhancing Trump’s negotiating leverage.
Encouraging Reciprocity:
- Trump’s “reciprocal” tariffs aim to match or exceed foreign tariffs, exposing imbalances. For example, the U.S. imposes a 2.5% tariff on cars, while the EU charges 10% and India 70%. By threatening matching tariffs, Trump pressures countries to lower their barriers.
- The threat of a 31% tariff on South Africa nullified its benefits under the African Growth and Opportunity Act, prompting negotiations for exemptions rather than retaliation.

Real-World Examples of Leverage in Action

U.S.-China Trade Talks (May 2025):
- Trump’s 145% tariffs on Chinese goods (April 2025) crippled China’s export-driven economy, prompting Beijing to negotiate in Geneva. The resulting 90-day tariff pause (U.S. tariffs to 30%, China’s to 10%) and agreement to discuss U.S. market access show how tariffs forced China to the table.
- China’s concessions, like suspending rare earth export restrictions, reflect Trump’s ability to extract compromises by targeting economic vulnerabilities.
U.S.-UK Trade Deal (May 8, 2025):
- Facing 10% baseline and 25% auto/steel tariffs, the UK negotiated a deal reducing auto tariffs to 10% for 100,000 vehicles and eliminating steel tariffs, while the U.S. gained better access for beef and ethanol exports. This deal shows tariffs driving mutual concessions.
Canada and Mexico (February–April 2025):
- Trump’s 25% tariffs on Canada and Mexico, tied to fentanyl and immigration, led to quick exemptions when both countries enhanced border security. The indefinite exemption of USMCA-compliant goods (49% of Mexico’s imports) rewarded compliance while maintaining pressure.
South Africa and Vietnam:
- South Africa, hit with a 31% reciprocal tariff, chose negotiations over retaliation to preserve U.S. market access, planning to diversify exports to Asia and Europe.
- Vietnam’s trade deal with the U.S. after a 46% tariff threat highlights how smaller economies yield to avoid economic harm.

Potential Benefits of Trump’s Strategy

Better Trade Deals: Tariffs have forced countries to offer concessions, like increased U.S. exports (e.g., China’s potential agricultural purchases) or lower foreign tariffs (e.g., UK deal).
Domestic Economic Gains: By making foreign goods pricier, tariffs could boost U.S. manufacturing and jobs, especially in industries like steel and autos.
Geopolitical Leverage: Linking tariffs to issues like fentanyl or immigration strengthens Trump’s hand in non-trade negotiations.
Global Reciprocity: Long-term, reciprocal tariffs could lead to a freer trade system if countries lower barriers to avoid U.S. tariffs, as some X posts suggest.

Risks and Criticisms

To give you a balanced view, it’s worth noting the risks, as tariffs aren’t a magic bullet:

Economic Costs: Tariffs raise prices for U.S. consumers (e.g., a high-end iPhone could hit $2,300) and cost households ~$1,200 annually in 2025.
Retaliation: China’s 125% tariffs and Canada’s 25% vehicle tariffs hurt U.S. exporters, especially farmers and automakers.
Global Recession Risk: The IMF and OECD downgraded 2025 growth forecasts, citing tariffs as a trigger for a potential U.S. recession.
Strategic Missteps: Some argue Trump misjudged China’s resilience, as Beijing diversified trade and resisted early talks, prolonging the standoff.
Allied Tensions: Tariffs on allies like Japan, South Korea, and the EU strain diplomatic ties, potentially isolating the U.S. in broader geopolitical conflicts.

Explanation: A Simple Analogy

Imagine Trump as a shopkeeper running a huge store (the U.S. market) that everyone wants to sell to. He notices other stores (countries) charge high fees for his goods, while he lets their goods in cheaply. To level the playing field, he slaps fees (tariffs) on their goods, making them beg to lower his fees in exchange for access to his store. Sometimes, he pauses the fees to show he’s open to deals, but keeps the threat alive to get better terms—like more sales for his own goods or help with other issues (e.g., stopping drugs). It’s risky—customers might pay more or shop elsewhere—but it gives him power to renegotiate the rules.

Key Points to Share:

Tariffs are taxes on imports to make foreign goods costlier, pushing people to buy American.
Trump uses them to pressure countries into trade deals that favor the U.S., like lower foreign tariffs or more U.S. exports.
Examples: China’s tariff cuts, UK’s auto deal, and Mexico’s border concessions show tariffs forcing negotiations.
It’s not perfect—prices rise, and other countries fight back—but it’s a bold way to use U.S. economic muscle.

Deeper Insights for a Curious Read

If you want more nuance, here’s how Trump’s strategy fits into game theory and global economics, as some X posts highlight:

Game Theory in Action: Trump’s tariffs are a “credible threat” in a repeated game. By imposing high costs (e.g., 145% on China), he signals willingness to escalate, forcing opponents to fold or compromise. Pausing tariffs (e.g., 90-day China deal) rewards cooperation, reinforcing his strategy.
Dollar’s Role: The U.S. dollar’s status as the global reserve currency amplifies Trump’s leverage, as countries need dollars for trade. Tariffs could also push for a new economic order, reducing the dollar’s trade deficit costs, though this risks market turmoil.
Long-Term Vision: Some supporters argue Trump aims for a “no-tariff” world by forcing reciprocity, where all countries lower barriers. This aligns with his claim that tariffs are temporary tools for fairness, not permanent barriers.