In announcing the measures from the Rose Garden on April 2, which he called America’s “Liberation Day,” Trump said his tariffs will help recover manufacturing jobs and revive demand for American-made products. To strike a raw nerve with his base, the businessman-turned-president cast the United States as a victim of an unjust global trade system, which has been “looted and pillaged” by foreign “cheaters” and “scavengers” for decades.

The aggressive move had many economists and experts sound the alarm. Experts believe the United States is in for higher inflation, slower growth, and even another recession in the coming months.

The tariffs, a minimum 10% levy on all imports, represent the largest tax hike since 1909, when tariffs were the primary source of federal revenue. Some countries face significantly higher rates, with tariffs reaching up to 50%. For example, China was slammed with an additional 34% tariff on top of the 20% imposed earlier this year, bringing total levies to 54%. The European Union, America’s largest trading partner, was hit by a 20% tariff.

Tariffs are essentially extra costs imposed on imported goods. They often lead to higher prices for consumers by creating additional costs at multiple stages in the supply chain. Businesses importing goods and materials will bear the brunt of these costs. To maintain their margin of profits, they pass the new costs on to retailers or directly to consumers.

In addition, domestic producers who rely on imported materials or intermediate goods face higher production costs due to the tariffs. These increased costs are typically reflected in the final price of goods and services.

Tariffs may limit the availability of foreign-made goods and therefore increase demand for domestic alternatives. Without the competitive pricing of imports, domestic producers may raise their own prices, further driving costs up for consumers.

Finally, as prices rise across various sectors, overall inflation tends to increase. This means everyday essentials will be more expensive and consumers’ purchasing power will be reduced. That, in turn, will weaken domestic demand, a critical driver of economic growth.

The Budget Lab at Yale estimates that Trump’s tariffs will drive up U.S. prices by 2.3% in the near term, amounting to an average loss of $3,800 per household. Lower-income families will feel the pinch the most, with their disposable income (i.e. the income left after taxes are paid) shrinking 2.5 times more than that of wealthier households.

Consumer spending is likely to falter as households will have no choice but to tighten their belts in the face of higher prices.

At the grocery store, staples like bananas, coffee, and chocolate — imported from Latin America — are expected to see price hikes due to new tariffs. Clothing, a necessity for all, is another sector to be hit hard. With 97% of apparel imported, tariffs on Vietnam (46%) and Bangladesh (37%) will make wardrobes more expensive for American families.

Big-ticket items like cars and tech gadgets are also in the crosshairs. iPhones and video game consoles could see price hikes of up to 40%. U.S.-made cars could cost $3,285 more, while the price of foreign-made cars might jump by $5,000 to $15,000, according to an analysis by Goldman Sachs. These price hikes are likely to dampen sales, with estimates predicting a drop of 2.5 million vehicles this year alone.

What else is at stake?

The new tariffs did include an exemption: they won’t be applied to the oil and gas industry, a major contributor to Trump’s presidential campaign.

But the ripple effects will extend beyond price tags. Economists warn that the mix of stagnation and inflation — known as stagflation — could plunge the U.S. economy into a recession. With consumer spending accounting for 70% of GDP, any slowdown could have far-reaching consequences for the economy.

Wall Street analysts predict that retaliatory tariffs from other nations, such as China’s 34% levy on U.S. imports, could slash America’s GDP by 2% and push unemployment to 7.5%.

A cautionary tale from the past

The fallout is already evident in financial markets. In the wake of Trump’s announcement, stock markets tumbled in the U.S., Asia, and Europe. Shares saw their steepest drop since the early days of the COVID pandemic in 2019, with major indexes like the Dow, S&P 500, and Nasdaq posting losses of more than 5%. The U.S. dollar has also dropped to six-month lows against the euro, yen, and Swiss franc, reflecting investor concerns about the long-term impacts of Trump’s trade policies.

The historical precedent of the Smoot-Hawley Act of 1930, the last time tariffs were raised nearly this high, serves as a cautionary tale. The infamous 1930 tariffs — widely blamed for deepening the Great Depression — were less severe than those announced by President Trump. The stakes are even higher today as imports now account for three times the share of the U.S. economy compared to the 1920s, in the lead-up to the Smoot-Hawley Act.

Meanwhile, Trump is pushing Congress to pass a shocking $5.3 trillion in tax cuts, which will disproportionately benefit the wealthy. The toxic combination of tariffs that burden middle-class families and tax breaks for the rich could have dire consequences for the U.S. economy.

Retaliatory tariffs from U.S. trade partners will worsen the situation. As demand for American exports falls, companies will reduce production, lowering demand for workers. This will hurt job opportunities and push wages down, especially for lower-income individuals.

Trump says his tariffs will bring in new revenue. But any financial benefits from the measures are far from certain. Any new revenue they might generate could be offset by higher prices at home, shifts in buying and selling habits, and weaker competitiveness caused by slower economic activity.

Simply put, Trump’s tariffs could trigger a cycle of economic strain — higher costs, lower demand and competitiveness, and fewer jobs — ultimately working against the vey goals they aim to achieve.

Additionally, analysts point to another downside. Trump’s trade war threatens to undercut the global economic system the U.S. helped build at Bretton Woods after World War II. That monetary order, which established the dollar as the world currency and elevated the U.S. to the status of the world’s financial superpower, could now be undermined. Trump’s nationalist protectionism is chipping away at its foundation.

Trump’s tariff policies will not only hurt American families but will also damage the United States’ standing globally. These aggressive actions will alienate U.S. allies and fracture partnerships that took America decades to build.

As U.S. trading partners like Japan and South Korea forge regional trade agreements, and European leaders call for a united front in the face of the U.S. tariffs, America risks being isolated. Trump’s tariffs could shut out American businesses from global markets, and consumers worldwide will likely look for less pricy alternatives to U.S. goods and services. This will make the U.S. economy less resilient to potential blows, like the 2008 financial meltdown.

Finally, the effects of Trump’s trade war could take generations to repair. If history is any indication, trade wars rarely have winners — especially when one government attempts to take on the entire world.