The 2025 Tariff policy: A multidimensional assessment and its empirical economic costs

Hello,


So , first , i want to tell you that you have , from my below articles and new papers , to not be so pessimistic about Donald Trump’s economic policy , since of course USA is a Democracy , so Donald Trump’s economic policy , in this four years of his presidency , is continuously monitored with statistics etc. so that to be evaluated so that to know if it is good or not , so i think it is the advantage of Democracy , other than that , we have not to be so pessimistic about the radical or extremist retaliation with tariffs from trading partners , since the economic conditions have much more improved in our today world compared to past history , so i think that the radical or extremist retaliation with tariffs from trading partners that can hurt USA or the world substantially is unlikely. So , i have written two interesting articles that are related to my today subject , and here they are:

A more deeper look at the Donald Trump's governance

https://myphilo10.blogspot.com/2025/04/a-more-deeper-look-at-donald-trumps.html

About the Donald Trump administration's financial regulatory approach

https://myphilo10.blogspot.com/2025/05/about-donald-trumps-administrations.html


And my today subject of my below two interesting new papers is: "The 2025 Tariff policy: A multidimensional assessment and its empirical economic costs" , and here are my two new papers about it , so i invite you to read them carefully:

And here is my first new paper:

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# Tariffs, Deficits, and Growth: Assessing the Global Validity of Donald Trump’s Economic Policy

## Introduction

Donald Trump has recently emphasized that his protectionist trade policies—particularly tariffs on imported goods—are projected to reduce the U.S. federal deficit by *$4 trillion over the next decade**, according to the Congressional Budget Office (CBO). This claim has sparked intense debate. On one hand, tariffs generate government revenue and can offer strategic protection to domestic industries. On the other hand, they risk slowing economic growth, raising consumer prices, and triggering retaliation from trading partners. This paper examines whether Trump’s policy is globally “correct” by evaluating it across fiscal, economic, political, and global trade dimensions.

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## Fiscal Dimension: Deficit Reduction

The **CBO’s August 2025 projection** estimates that sustained tariffs could reduce the deficit by $3.3 trillion in primary savings plus $700 billion in interest savings, totaling nearly $4 trillion. From a **narrow fiscal standpoint**, this represents a tangible gain: tariffs act like a tax, raising direct revenue while reducing reliance on borrowing. By lowering debt accumulation, tariffs might help stabilize long-term interest payments and create more fiscal space for future governments.

However, fiscal sustainability depends not only on revenue but also on expenditures. The U.S. deficit is heavily driven by entitlement programs, healthcare costs, and demographic pressures. Tariffs do not address these structural challenges. Thus, while Trump’s policy may improve the **deficit trajectory**, it does not resolve the root causes of federal debt.

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## Economic Dimension: Growth and Consumer Prices

Tariffs come with significant economic costs. By raising the price of imported goods and intermediate inputs, they act as a **regressive tax** on consumers, disproportionately burdening lower- and middle-income households. Higher input costs also weaken the competitiveness of U.S. businesses, potentially discouraging investment and innovation.

Moreover, if trade partners retaliate, American exporters—from farmers to advanced manufacturers—face reduced access to global markets. This can lead to **job losses** in export-oriented sectors, partially offsetting any job protection in tariff-shielded industries. Historically, protectionism has been associated with slower economic growth, and economists warn that tariffs may undermine the very tax base that sustains fiscal health.

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## Political and Strategic Dimension

Despite economic drawbacks, tariffs can serve **political and strategic purposes**. Domestically, they appeal to workers and communities that feel disadvantaged by globalization. Protecting industries such as steel, autos, or semiconductors can preserve employment in key regions, bolstering political support.

Internationally, tariffs provide leverage in trade negotiations. For example, Trump has used tariffs as a bargaining tool with China, arguing that they are necessary to counter unfair trade practices. While controversial, this strategy reflects a broader trend: both advanced and emerging economies are increasingly using targeted protectionism to secure strategic industries, from clean energy to defense technologies.

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## Global Dimension: Efficiency and Cooperation

Globally, the consensus among economists, the International Monetary Fund (IMF), and the World Trade Organization (WTO) is that tariffs are **inefficient in the long run**. Free trade generally promotes global efficiency by allowing each country to specialize in what it produces best. Widespread protectionism risks fragmenting supply chains, raising costs worldwide, and reducing overall prosperity.

Nonetheless, in a multipolar world where economic interdependence is weaponized, complete free trade may be politically unrealistic. Strategic tariffs in critical sectors could be justified as part of national security or industrial policy. Still, broad and persistent tariffs—like those Trump champions—are seen as detrimental to global economic stability.

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## Conclusion

So, is Donald Trump’s tariff policy globally correct? The answer depends on perspective.

* **Fiscally**, tariffs can indeed reduce deficits in the short to medium term, with credible estimates of up to $4 trillion in savings over a decade.
* **Economically**, the policy is costly: slower growth, higher consumer prices, and retaliation risks often outweigh fiscal benefits.
* **Politically and strategically**, tariffs can protect vulnerable industries and provide leverage in trade negotiations, making them attractive tools of statecraft.
* **Globally**, most economists and institutions argue that tariffs reduce efficiency and prosperity, especially when applied broadly.

**Final Verdict:** Trump’s policy is politically correct and fiscally useful in the short run, but economically and globally incorrect as a long-term growth strategy. A more sustainable approach would combine fiscal discipline with targeted industrial policy and cooperative trade agreements, rather than relying on broad protectionism.

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And here is what the AI (Artificial intelligence) from Google that is called Gemini 2.5 Pro , that is advanced , answered me about my above new paper:

"### Analysis of Your Paper: "Tariffs, Deficits, and Growth"

Your new paper, "Tariffs, Deficits, and Growth: Assessing the Global Validity of Donald Trump’s Economic Policy," is a well-structured and insightful analysis of a complex and highly relevant issue. It is both smart in its multidimensional approach and interesting in its balanced evaluation of a contentious policy. The paper's strength lies in its clear organization, addressing the fiscal, economic, political, and global facets of the tariff policy, leading to a nuanced and well-supported conclusion.

#### Detailed Assessment:

**Fiscal Dimension:** Your paper accurately captures the central claim regarding the Congressional Budget Office's (CBO) projection of a nearly $4 trillion deficit reduction over the next decade due to sustained tariffs. Recent reports from August 2025 confirm that the CBO estimated that increased tariff revenue could lower primary deficits by $3.3 trillion and reduce federal interest payments by $700 billion. Your analysis correctly identifies this as a significant fiscal gain in the short to medium term, acting as a direct revenue source for the government. The paper smartly points out, however, that this does not address the structural drivers of the U.S. deficit, such as entitlement spending.

**Economic Dimension:** The paper's assessment of the economic costs associated with tariffs is well-aligned with mainstream economic consensus. You correctly identify that tariffs can act as a regressive tax, increasing prices for consumers. This is a crucial point, as the costs of tariffs are often passed down through the supply chain to the final consumer. Furthermore, the paper astutely notes the risk of retaliatory tariffs from trade partners, which can harm U.S. exporters and potentially lead to job losses in those sectors. The concern that protectionism can lead to slower economic growth is a widely held view among economists.

**Political and Strategic Dimension:** Your analysis of the political and strategic motivations behind tariffs is sharp and realistic. The paper correctly identifies the domestic political appeal of protecting industries to appeal to workers and communities who feel left behind by globalization. Moreover, the use of tariffs as a leveraging tool in international trade negotiations is a key aspect of their modern application, a point you effectively highlight. This strategic dimension is crucial for understanding the policy's persistence despite economic criticisms.

**Global Dimension:** The paper accurately reflects the position of international organizations like the International Monetary Fund (IMF) and the World Trade Organization (WTO). These bodies have warned that widespread tariffs can lead to disruptions in global trade and risk sparking a trade war. The consensus among these organizations is that free trade generally promotes global efficiency and prosperity. The current U.S. tariff rates have been noted by the WTO and IMF as the highest since the early 20th century, underscoring the significance of this policy shift.

#### Is it Smart and Interesting?

Yes, the paper is both smart and interesting.

* **Smart:** The intelligence of the paper lies in its balanced and multi-faceted approach. It avoids a one-sided argument by acknowledging the valid points of different perspectives. The fiscal benefits are presented alongside the economic drawbacks, and the political motivations are not dismissed. This comprehensive view demonstrates a sophisticated understanding of the issue. The structure is logical, and the arguments are presented clearly and concisely.

* **Interesting:** The paper is interesting because it tackles a current and highly debated topic with clarity and analytical rigor. The central question of whether the policy is "globally correct" is a compelling one, and the paper's journey through different analytical dimensions keeps the reader engaged. The conclusion, which offers a nuanced verdict—"politically correct and fiscally useful in the short run, but economically and globally incorrect as a long-term growth strategy"—is a powerful and thought-provoking summary.

In conclusion, your paper is a high-quality piece of analysis. It is well-researched, thoughtfully argued, and presents a comprehensive overview of the complex interplay of factors surrounding the use of tariffs in modern economic policy."


And here is my supplementary new paper focusing on the statistical evidence of the negative economic impacts of the tariffs:

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### **Supplementary Analysis: The Quantifiable Costs of Protectionism**

### **Introduction**

This paper serves as a statistical supplement to the primary analysis of my new paper above, "Tariffs, Deficits, and Growth: Assessing the Global Validity of Donald Trump’s Economic Policy." While the original paper provides a multidimensional assessment, this analysis delves deeper into the "Economic Dimension," presenting quantitative evidence of the mounting costs and stagnation concerns arising from the 2025 tariff regime. The data, drawn from leading economic forecasting institutions as of late 2025, demonstrates that the tariffs' negative effects are not minor, but are creating a significant drag on the U.S. and global economies.

### **I. The Drag on Economic Growth: A Decisive Slowdown**

The implementation of broad and steep tariffs has led to a consistent downward revision of economic growth forecasts for the United States. With the average effective tariff rate reaching 18.6%—the highest level since 1933—the economic friction is becoming increasingly apparent.

* **U.S. GDP Projections:** The Organization for Economic Co-Operation and Development (OECD) projects that U.S. GDP growth will fall sharply from 2.8% in 2024 to 1.6% in 2025 and 1.5% in 2026, primarily due to rising trade costs. This sentiment is echoed by other analyses. Deloitte forecasts a slowdown to just 1.5% in 2025 and a mere 0.7% in 2026, cautioning that a technical recession (two consecutive quarters of negative growth) could begin by the end of 2025. The Budget Lab at Yale corroborates this, estimating that the tariffs will reduce U.S. real GDP growth by 0.5 percentage points in both 2025 and 2026, making the economy persistently smaller in the long run.

* **Global Contagion:** The economic slowdown is not confined to the U.S. The OECD also revised its global growth forecast downward, anticipating a drop to 2.9% for both 2025 and 2026. The World Trade Organization (WTO) and the International Monetary Fund (IMF) have issued stark warnings, with the WTO projecting that global merchandise trade could contract by 1% in 2025 due to the new U.S. tariffs and the risk of retaliatory escalations.

### **II. Mounting Costs for Consumers: The Inflationary Impact**

The argument that tariffs function as a regressive tax is now clearly visible in consumer price data. The costs are being passed through supply chains to American households, eroding purchasing power.

* **Accelerating Inflation:** The annual inflation rate stood at 2.7% in July 2025. More concerning is the trend in core inflation (excluding volatile food and energy), which accelerated to a five-month high of 3.1%. Economic models forecast this trend will worsen, with some projecting core inflation could reach between 3.3% and 3.9% by the end of 2025 as the full effect of the tariffs is absorbed by retailers.

* **Direct Household Costs:** The direct financial burden on families is significant. The Budget Lab estimates that the price level increase caused by the 2025 tariffs is equivalent to an average annual income loss of $2,400 per household. An earlier, more aggressive tariff package announced in April was projected to impose a loss of $3,800 per household.

* **Disproportionate Impact on Goods:** The price hikes are not uniform. Consumers face dramatic increases for specific categories of goods, with analyses showing short-run price spikes of 39% for shoes and 37% for apparel.

### **III. Labor Market Under Strain: A Net Job Loss**

While a key political goal of tariffs is to protect domestic jobs, the statistical outlook indicates that the net effect on the U.S. labor market is negative. Uncertainty and rising input costs are leading to hiring freezes and layoffs that outweigh gains in protected sectors.

* **Projected Job Losses:** Recent econometric models paint a concerning picture. One comprehensive analysis estimates that the tariff policy will result in 505,000 fewer payroll jobs by the end of 2025. Other forecasts place the net job loss in a range of 250,000 to 309,000. This corresponds with a projected increase in the unemployment rate of 0.3 percentage points in 2025, rising to 0.7 percentage points by the close of 2026.

* **Sectoral Imbalances:** The tariffs create a clear trade-off between industries. While manufacturing may see a modest output expansion of around 2.1%, these gains are more than nullified by contractions in other major sectors. Construction output is projected to decline by 3.6% and agriculture by 0.8% due to higher input costs and retaliatory tariffs. Historical precedent from the 2018 steel tariffs supports this dynamic, where more jobs were lost in steel-consuming industries than were saved in steel production.

### **Conclusion**

The statistical evidence from late 2025 strongly indicates that the economic costs of the current tariff policy are substantial and tangible. The initial premise that a low import-to-GDP ratio would mute the negative effects is not borne out by the data. Instead, the U.S. is facing a measurable slowdown in economic growth, a significant rise in consumer prices that reduces household income, and a net loss of jobs. While the fiscal benefits of tariff revenue exist, this supplementary analysis demonstrates that they come at a high economic price, validating the conclusion that the policy is "economically and globally incorrect as a long-term growth strategy."


And here is what the AI (Artificial intelligence) from Google that is called Gemini 2.5 Pro , that is advanced , answered me about my above new supplementary paper:

"### **Analysis of Your Supplementary Paper: "The Quantifiable Costs of Protectionism"**

Your supplementary paper provides a robust and statistically rich follow-up to your initial analysis. It effectively transitions from the broader multi-dimensional assessment to a focused, data-driven examination of the economic consequences of the described 2025 tariff regime. The paper is well-structured, persuasive, and its claims are strongly supported by credible, contemporary economic forecasts.

#### **Detailed Assessment:**

**I. The Drag on Economic Growth:** Your analysis of the slowdown in both U.S. and global GDP is well-substantiated.

* **U.S. GDP Projections:** The figures you cite are consistent with recent economic forecasts. The Organization for Economic Co-operation and Development (OECD) indeed projects a significant slowdown for the U.S. economy, with growth expected to fall to 1.6% in 2025 and 1.5% in 2026. Your reference to the Budget Lab at Yale's estimate that tariffs will reduce U.S. real GDP growth by 0.5 percentage points in both 2025 and 2026 is also accurate. While Deloitte's specific forecast numbers vary slightly in some reports (projecting around 1.4% to 1.5% growth in 2025 and 2026 under their baseline), they similarly caution that escalating trade tensions could trigger a GDP contraction.
* **Global Contagion:** Your depiction of the global economic impact is also well-supported. The OECD has revised its global growth forecast downward to 2.9% for both 2025 and 2026, citing rising trade barriers as a key factor. Furthermore, the warnings from the World Trade Organization (WTO) and the International Monetary Fund (IMF) are accurately portrayed. The WTO has projected that global merchandise trade could contract by as much as 1% in 2025 due to the new U.S. tariffs and the risk of retaliation.

**II. Mounting Costs for Consumers:** The paper's claims regarding the inflationary impact of tariffs and the direct costs to households are strongly backed by available data.

* **Accelerating Inflation and Direct Household Costs:** You correctly note the rise in the effective tariff rate to 18.6%, the highest since 1933. The Budget Lab at Yale supports your claim of a significant financial burden on families, estimating that the price level increase from the tariffs is equivalent to an average annual income loss of $2,400 per household.
* **Disproportionate Impact on Goods:** Your specific examples of price hikes for shoes (39%) and apparel (37%) in the short run are directly corroborated by analysis from the Budget Lab at Yale.

**III. Labor Market Under Strain:** The statistical evidence you present on the negative net effect on the U.S. labor market is credible and aligns with recent econometric modeling.

* **Projected Job Losses:** The projection of 505,000 fewer payroll jobs by the end of 2025 is a direct finding from a comprehensive analysis by the Budget Lab at Yale. Their research also supports the projected increase in the unemployment rate of 0.3 percentage points in 2025, rising to 0.7 percentage points by the end of 2026.
* **Sectoral Imbalances:** The paper accurately captures the trade-offs between different sectors of the economy. The modest expansion in manufacturing (around 2.1%) being more than offset by contractions in construction (-3.6%) and agriculture (-0.8%) is a key finding from the Budget Lab at Yale's sectoral analysis.

### **Overall Evaluation:**

This supplementary paper is an excellent piece of work. It is:

* **Smart:** You have effectively synthesized data from multiple reputable sources to build a compelling and coherent argument. The focus on quantifiable evidence provides a powerful and persuasive layer to your initial, more qualitative paper.
* **Interesting and Timely:** The paper addresses a highly relevant and contentious issue with up-to-date (late 2025) statistical information. This makes the analysis both engaging and impactful.
* **Well-Researched:** Your use of specific data points from institutions like the OECD, Deloitte, and the Budget Lab at Yale demonstrates thorough research and a strong grasp of the available economic analyses.

In conclusion, this supplementary analysis significantly strengthens your overall thesis. By providing concrete evidence of the economic costs, you have successfully validated the conclusion of your first paper: that while the tariff policy may have short-term fiscal and political utility, it is "economically and globally incorrect as a long-term growth strategy." The statistical backing you've provided makes this conclusion all the more convincing."


Thank you,
Amine Moulay Ramdane