Tariffs have long been one of the most hotly debated tools in global trade. They can serve as a lever for protecting domestic industries, as a source of revenue, and as a geopolitical weapon. In 2025, tariffs are once again dominating headlines, as President Donald Trump, now in his second term, imposes sweeping trade restrictions aimed at reshaping America’s role in the global economy.
A Brief History of Tariffs in the U.S.
Tariffs have played a central role in America’s economic development. The Tariff Act of 1789 was one of the first major pieces of legislation passed by Congress, intended to protect budding U.S. industries and generate revenue for the new federal government. By 1828, tariffs averaged 38% and were heavily contested, leading to the so-called “Tariff of Abominations,” which deepened sectional divides.
The Smoot-Hawley Tariff Act of 1930, passed during the Great Depression, is often cited as a cautionary tale: its protectionist aims triggered retaliatory tariffs from other countries and worsened the global economic downturn. In response, President Franklin D. Roosevelt introduced the Reciprocal Trade Agreements Act of 1934, shifting toward negotiated tariff reductions and laying the groundwork for multilateral agreements such as GATT and, later, the WTO.
For much of the late 20th century and early 21st, the U.S. embraced free trade through agreements like NAFTA and the accession of China into the World Trade Organization. That trend has reversed in recent years.
Tariffs in 2025: The Trump Doctrine Returns
Since returning to the White House, President Trump has rapidly expanded the use of tariffs as an instrument of economic policy. In April, the administration imposed 25% duties on imported automobiles and auto parts, impacting vehicles made both abroad and domestically, since many U.S.-assembled cars use foreign-made engines, transmissions, and components.
Shortly after, the administration closed the long-standing “de minimis” loophole, which allowed products under $800 in value to enter the U.S. duty-free. The change primarily targets Chinese imports, many of which now face effective tariffs of up to 145%.
China responded swiftly, raising tariffs on U.S. goods to as high as 84%, banning several American firms from its market, and halting imports of key U.S. agricultural and poultry products. What began as a policy aimed at rebalancing trade has quickly escalated into a full-blown trade war, with global ramifications.
The Motivation Behind the Measures
President Trump has long framed tariffs as a means of protecting American manufacturing, correcting trade deficits, and even fighting the flow of drugs and illegal immigration. He has argued that these levies force companies to bring production back to the U.S., create jobs, and generate billions in revenue for the federal government.
However, economists warn that many of these goals are at odds. Tariffs intended to boost U.S. industry also raise input costs, disrupt supply chains, and, in many cases, result in higher prices for consumers.
Who Actually Pays for Tariffs?
Despite political rhetoric, tariffs are paid by U.S. importers, not foreign governments. For example, if a U.S. company imports $100 worth of shoes from Vietnam, and those shoes face a 46% tariff, the importer must pay $46 to the U.S. Treasury.
Companies may attempt to pass those costs to suppliers, absorb the losses internally, or raise prices for consumers. Most studies from Trump’s first term show that tariffs on China were largely passed on to American buyers, while levies on materials like steel were split between producers and consumers.
The Consumer Impact
For many American households, the effects are beginning to show. Everything from electronics and toys to auto repairs and groceries is becoming more expensive. Trump himself addressed this reality, stating, “Maybe the children will have two dolls instead of 30 dolls, and maybe the two dolls will cost a couple of bucks more.”
Toymakers and specialty retailers have already reported delays and cancellations ahead of the 2025 holiday season. Nearly 80% of toys and 90% of Christmas decorations sold in the U.S. are made in China. A recent Toy Association survey found that over half of small toy manufacturers may go out of business if tariffs persist.
Trading Partners Strike Back
China, the primary target of U.S. tariffs, has retaliated aggressively. Beyond hiking import duties, Beijing has restricted American firms from its market and encouraged domestic substitution. The unraveling of what economists once called “Chimerica”—the deep integration of the U.S. and Chinese economies—marks a sharp break from the past half-century.
Other nations, including Mexico, Canada, and European allies, have also found themselves in the crosshairs of Trump’s tariff strategy, creating diplomatic rifts and market instability.
The Road Ahead
In early April, facing market turbulence and a steep decline in Treasury bond prices, the Trump administration temporarily paused some tariff actions. Yet the broader strategy remains intact. The White House continues to explore new tariffs and trade enforcement tools, while international institutions warn of prolonged inflation and slowing global growth.
Federal Reserve Chair Jerome Powell and leaders from the IMF and World Bank have all cautioned that current U.S. trade policies could disrupt financial stability.
What You Can Do Now
In this volatile landscape, proactive trade management is crucial. Companies should:
- Monitor HTS codes for changes
- Explore alternative sourcing outside tariff-affected regions
- Use tools like duty drawback and foreign trade zones to reduce exposure
- Stay current on shifting regulations and enforcement actions
Most importantly, they should work closely with a trusted customs broker such as us, M.E. Dey, to remain compliant and cost-efficient.