Trade Wars and Tariffs – Winners, Losers, and the Long-Term Impacts

Santiago Bel
December 14, 2024

When Donald Trump slapped his first tranche of tariffs on Chinese imports in 2018, no one realized how much it would alter the trade conversation. For years, economists and politicians debated the extent to which America was being exploited by other countries like China that would sell things to Americans for less than they would sell it for in their own country. Trump’s solution was easy: make foreign products more expensive and propel companies to buy American. For a while, it worked that way; it sounded patriotic and protective. But, like most economic tools, tariffs cut both ways.

A tariff is basically a tax on imports. If a company in the United States buys steel from China and there is a 25% tariff, that company pays 25% more. The goal is to get them to purchase steel from an American manufacturer instead. Global supply chains are closely interconnected is the problem. American companies that want to buy American condemn the practice of purchasing goods that are not produced domestically. When tariffs increase, costs are spread all throughout the industry, so places like construction, car-makers, and consumer products all get affected.

In the beginning of the trade war, Trump’s team applied tariffs to steel, aluminum, solar panels, electronics, and many other products. In retaliation, China imposed tariffs on American exports, particularly targeting agricultural items such as soybeans and corn that would hurt U.S. farmers. By the year 2019, goods worth several hundreds of dollars were involved. Manufacturers in the US were faced with higher costs, farmers lost important customers, and consumers started to pay more for everything from a washing machine to beer can.

The administration’s argument revolved around the idea of pain leading to gain. The logic was that tariffs would compel China to cease stealing intellectual property, open its markets, and play fair. but China stood firm and retaliated with equal vigor. Many American farmers had to depend heavily on federal aid to remain in business. While some companies swallowed the costs, others passed them on to customers. Even with all the political mockery and drama, the U.S. trade deficit, the gap between imports and exports, barely budged. 

Still, the tariffs weren’t a complete failure. 

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Certain markets, such as US steel, saw a short-lived rise in output. Some industries, such as semiconductor manufacturing, started to fall under a bigger national security and supply chain independence conversation. More and more people believed that America had since become too reliant on foreign producers, especially for essential materials. When the COVID pandemic came along, those concerns were proven real. There was a sudden shortage of everything from masks to microchips. This proved how fragile global trade has become.

Most of those tariffs that were imposed by Trump stay effective till now. The Biden administration has maintained many of these measures, not due to their effectiveness in reducing deficits but because of the political difficulty of reversing them. These days, both parties are talking about economic “resilience” and “strategic independence.” The discussion has moved from “free trade” to “secure trade” — making sure we don’t end up too dependent on any one country for our tech, energy and defense.

When countries engage in trade wars, it doesn’t just impact the world of business and consumers. It transforms the relationship and image that countries have of one another. The United States and China aren't simply fighting over steel and soybeans; they're fighting over who will lead the global economy in the 21st century. Ever since, China has upped the ante and redoubled efforts to create innovations and build new trade partnerships in Asia and Africa. As the U.S. has formed coalitions with allies, such as Japan, South Korea and India, to counter China’s hegemony.

For a short period of time, tariffs can be seen as job protectors. A politician could celebrate a victory by bringing up the reopening of a local steel mill. But economists warn that these gains are often temporary. Because of rising costs across the economy, companies that rely on cheap imports — such as auto firms and electronics producers — may be forced to lay off workers or shift production. When one sector is protected, another usually suffers.

For consumers, the effects are subtle but steady. Inflation rises slightly because imported goods cost more. A phone that would’ve sold for $900 might now be $950. Groceries creep up as transport and packaging costs climb. When you make a lot of little changes, it adds up over time, and households will lose purchasing power.

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The complexity of today’s global economy far exceeds that of the Cold War era, when one country could easily be singled out in trade policy. Today, a single car may have parts from twelve countries. A computer made in Vietnam could have chips from Taiwan, screens from South Korea, and programming made in the US. Making an effort to cut connections through tariffs is akin to cutting the strings of a spider web — the entire web shakes.

Nonetheless, trade wars show us something important about modern economics: countries compete today not just on cost but on control. Control involves technological control, resource control, and the ability to produce what is essential in times of crisis. The tensions between the two countries did not start with Trump or tariffs but with Huawei. Both the US and Chinese governments are investing heavily in chip production, green energy, and next-generation manufacturing.

So, who really wins a trade war? In truth, no one fully does. Politicians might score short-term political victories. Some industries might get a temporary boost. But in general tariffs tend to slow growth, raise prices and damage confidence between traders. The long-term solution isn’t isolation — it’s balance. We must endorse fair trade while protecting vital industries. We should recognize that we need to cooperate and compete around the world.