To The Moon

"How U.S. Tariffs Backfire: Protecting Industry at the Expense of Citizens and Allies"

*New analysis reveals Trump-era tariffs primarily burden American consumers while reshaping global trade alliances based on bilateral deficits.*

### **Introduction**

The United States has wielded tariffs as a weapon against trade imbalances since 2018, but mounting evidence suggests these policies disproportionately hurt U.S. households while fostering a transactional approach to international relations. With the 2025 tariff expansions targeting China (54%), Vietnam (46%), and the EU (20%), the Biden and Trump administrations have doubled down on a strategy that economist Paul Krugman calls "self-inflicted economic wounds."

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### **Key Findings**

1. **The Consumer Burden**

- A 2024 *Tax Foundation* study found U.S. tariffs cost households **$1,200/year** in higher prices, with low-income families spending **3x more** as a share of income.

- Example: Section 301 tariffs on Chinese goods raised U.S. washing machine prices **12%** (Federal Reserve data).

2. **Trade Deficits Persist**

- The U.S. trade deficit with China **narrowed by 15%** post-tariffs but surged with Vietnam (+182%) and Mexico (+48%) as supply chains rerouted (*U.S. Census Bureau*).

- **Irony Alert:** The U.S. now imports more tariff-free components from allies like South Korea to assemble "Made in USA" products, masking deficit shifts.

3. **The New 'Friendship' Test**

- The 2025 reciprocal tariffs explicitly tie rates to bilateral trade balances:

- **Allies with surpluses** (e.g., Australia at 25% for minerals) face hikes.

- **Deficit-heavy foes** (China, Vietnam) bear the brunt.

- Exception: **USMCA partners** avoid auto tariffs if ≥75% North American content is used.

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### **Geopolitical Fallout**

- **ASEAN Divide**: Singapore (10% tariff) gains as a neutral hub, while Vietnam (46%) loses FDI to India and Indonesia.

- **EU Retaliation**: Brussels imposed **50% tariffs on U.S. whiskey** and Harley-Davidsons, hitting Republican-voting districts.

- **Cold War 2.0**: The China decoupling moves fastest in tech, where tariffs exceed **$150 billion** annually.

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### **The Competitiveness Paradox**

Tariffs were meant to revive U.S. manufacturing, but:

- **Steel jobs** grew by **3,200** since 2018 while costs to steel-consuming industries erased **75,000 jobs** (Economic Policy Institute).

- **Semiconductor tariffs** pushed chip prices up **8%**, delaying AI infrastructure projects (*Semiconductor Industry Association*).

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### **Conclusion: A Strategy in Search of Results**

The 2025 tariffs reveal a fundamental miscalculation:

1. **They tax Americans** more than foreign producers.

2. **They reward surplus allies** while punishing deficit partners, reducing diplomacy to accounting.

3. **They ignore supply chain realities**—globalization can’t be undone by tariffs alone.