Economic Consequences and Retaliation

The implementation of tariffs not only raises consumer prices but also distorts the overall economy by favoring certain protected industries at the expense of others. For instance, while protected sectors might enjoy higher profits, this comes at the cost of reduced disposable income for consumers, which negatively impacts unprotected industries. Additionally, retaliatory tariffs can exacerbate economic strain, with countries like China targeting quintessential American products in response to U.S. tariffs. This cycle of tariffs could lead to long-term economic contraction, with estimates suggesting that current proposals may shrink the GDP by up to 0.8%, which is significant in a $27 trillion economy.