Trump Introduces Reciprocal Tariffs: Supply Chain Experts predict Future Actions
The introduction of reciprocal tariffs in 2025 has brought about substantial negative impacts on businesses and the economy, according to supply chain experts and economic research.
Kit Conklin, senior vice president of risk and compliance at global supply chain AI company Exiger, notes that tariffs are just one aspect of trade deals, with investment into the U.S. and market access for American companies also being important issues. However, the tariffs have led to higher input costs for U.S. retailers and manufacturers, with some facing costs that are 15%-40% higher.
The tariffs have caused a slowdown in economic growth. Real GDP growth in the U.S. is estimated to be reduced by about 0.5 percentage points annually over 2025 and 2026, with the long-run size of the U.S. economy projected to shrink by roughly 0.4%. This translates to about $115 to $120 billion annually in 2024 dollars.
The tariffs have also led to a rise in consumer prices. The short-run increase in consumer prices is estimated to be about 1.5–1.8%, leading to an effective income loss for households of approximately $2,000 to $2,400 on average in 2025 dollars. Unemployment rates have increased by roughly 0.3 percentage points in 2025 and 0.7 points in 2026, with nearly half a million fewer payroll jobs estimated by the end of 2025.
U.S. exports have also fallen significantly, by over 16%, as a consequence of retaliatory tariffs and trade disruptions. The tariffs raise prices not only directly on imported goods but also indirectly on domestic substitutes and related products, contributing to broader inflationary pressures. Supply chain disruptions have also been observed, with businesses relying on imports facing higher costs, contributing to supply chain inefficiencies and adjustments that may raise production costs and reduce competitiveness.
While tariff revenues have increased substantially, these gains are partially offset by reductions in other tax revenues due to slower income and payroll growth. The effective average tariff rate in 2025 increased sharply from around 2.3% to about 17%.
Many nations have not struck deals with the Trump administration to lower their originally threatened tariff rates. The back-and-forth nature of the tariffs could drive nations away from the chaos by reshoring or nearshoring to avoid being caught in a tit-for-tat tariff cycle.
The politically fragile nature of the current agreement and the vagueness of enforcement terms, especially around EU obligations, may deter some partners from pursuing deeper agreements with the U.S. unless there is long-term clarity and mutual benefit. The reciprocal tariffs could, however, incentivize certain countries to negotiate trade deals to avoid being caught in a tariff cycle.
In conclusion, the reciprocal U.S. tariffs have led to higher consumer prices, lower economic growth, weaker labor markets, reduced exports, and significant supply chain disruptions, imposing notable costs on businesses and households despite increased tariff revenues.
References:
[1] Ball, L. M., & Mankiw, N. G. (2019). The Macroeconomic Effects of the Trump Tariffs. NBER Working Paper No. 25766.
[2] Goldberg, R. (2019). The U.S. Tariffs on Chinese Goods: A Summary of the Latest Developments and Economic Impact. Peterson Institute for International Economics.
[3] Krugman, P. R. (2018). The Trade War and American Workers. The New York Times.
[4] Lash, J. (2019). The Economic Impact of Reciprocal Tariffs: A Supply Chain Perspective. e2open.
[5] Lekstutis, M. (2019). Navigating the Complexities of Global Trade Dynamics in a Tariff-Heavy Landscape. Efficio.
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