Why does Trump want to rebalance trade using tariffs?

His economic team, led by former CEA chair Stephen Miran, argues the dollar's reserve currency status keeps it structurally overvalued. That makes U.S. exports expensive and imports cheap, so countries like China and Japan sell heavily into the U.S. and reinvest those dollars into American assets instead of spending at home. Tariffs are meant to break that cycle and push demand back toward domestic production.

What is Trump's tariff policy in 2026?

In February 2026, the Supreme Court ruled that Trump's tariffs under the International Emergency Economic Powers Act were illegal, since only Congress holds the constitutional power to tax imports. The administration replaced them within hours using Section 301 authority instead. By July 2026, new tariffs of 10% to 12.5% applied to roughly 60 countries, and the average effective U.S. tariff rate stood at 6.7%.

Do tariffs always cause inflation?

Not necessarily. Tariffs rose sharply in the 1930s while prices actually fell, and tariffs dropped steadily between 1960 and 1980 even as inflation surged into double digits. Inflation depends more on monetary policy, consumer demand, and supply chains than on tariff levels alone. History shows tariffs and inflation don't move together in any consistent pattern.

How do tariffs affect consumers and businesses?

Tariffs raise costs for consumers and importers while giving some protection to domestic producers competing with foreign goods. The results have been mixed. U.S. manufacturing lost 108,000 jobs during Trump's first year back in office, even as certain protected industries saw less foreign competition. That gap between intended and actual outcomes is common with broad tariff policy.

What happened during the Smoot-Hawley tariff era?

The Smoot-Hawley Tariff Act of 1930 raised duties on over 20,000 imported goods and triggered retaliation from more than two dozen countries. U.S. trade with Europe fell by roughly two-thirds between 1929 and 1932, and world trade overall dropped about 66% by 1934. Many economists still point to it as a lesson in how tariffs can backfire during a downturn.

Trump's Tariffs: Winners, Losers, and What Comes Next

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Trump's Tariffs: Winners, Losers, and What Comes Next | Dunham