Tariffs and Trade Wars: Examining Trump’s Legacy on the U.S. Economy in 2025

In 2025, in his second term as president, Donald Trump’s tariffs continue to dominate the U.S. economic landscape. What began as aggressive “America First” trade policies have now evolved into a complicated legacy, marked by revenue gains, economic disruption, and rising political animosity.

Tariffs have indeed generated significant income for the U.S. Treasury. As of mid-2025, tariffs revenues accounted for roughly 5 percent of total federal revenue—- a big increase from a historical average of 1–2 percent. The Congressional Budget Office estimated that if these tariffs are maintained over the next decade, they could reduce the federal deficit by $2.8 trillion.

Yet the economic-trade offs of these tariffs are steep. The Budget Lab at Yale finds that the tariffs implemented in 2025 by the U.S. have reduced U.S. real GDP growth by 0.5 percentage points per year, pushing the long-run economy into a 0.4 percent contraction— which translates into roughly $120 billion in annual economic output lost. The same analysis reveals a short-term 1.8 percent increase in consumer prices , eroding household budgets— especially those of lower-income families— by an average of $2,200 annually. These are negative effects: the poorest households experience 3 times the burden experienced by high-earning households.

However, some industries have benefited also, as domestic steelmakers and certain manufacturing firms have reported modest gains, with the overall U.S. manufacturing output rising about 2 percent. Yes those improvements have been more than offset by deep losses in agriculture, advanced manufacturing, and construction, where higher input costs have stalled activity . Farmers in particular have struggled immensely from China’s retaliatory tariffs and other trading partners, forcing Washington to provide fresh rounds of subsidies.

The labor market has also shown signs of strain under Trump’s tariffs. In August, the economy added just 22,000 jobs, and unemployment rose to 4.3 percent. Manufacturing, construction, and energy— the very sectors that the tariffs were meant to protect— shed jobs. Economists at the Penn Wharton Budget Model warn that, if the current policies remain in place, the U.S. could face a long-term 6-percent reduction in GDP and a 5 percent drop in wages. “Tariffs function as taxes”, the group said in an April forecast, “and they ultimately slow growth rather than accelerate it.”

The legal and political battles around the tariffs implemented have only increased this uncertainty. A federal appeals court ruled that Trump had exceeded his constitutional authority by imposing tariffs under emergency powers, a case now headed towards the Supreme Court. Trump has insisted that rolling back the tariffs would end up resulting in an “economic catastrophe,” pointing to the $159 billion already raised since his second term began.

Internationally, the aggressive stance on  tariffs has strained U.S. relationships with allied countries. Various countries such as Canada, Mexico, and the European Union, have all filed complaints through the World Trade Organization, while China has pursued its own countermeasures. Analysts say that global supply chains are being reshaped in response, with industries relocating manufacturing production away from both China and USA to avoid escalating trade barriers. 

Trump’s defenders argue that the tariffs are forcing the overdue corrections to a global trading system they view as unfair to American workers. On the other hand, his critics counter that the tariffs policy is eroding household wealth, slowing job growth, and destabilizing international ties with other countries.

Nine months into his second term, the impact is clear: the tariffs have boosted federal revenue and elevated protectionism in U.S. policy,  but at the cost of slower economic growth, higher consumer prices, and messed up international relationships. Whether this gamble strengthens the U.S. economy in the long run or leaves behind lasting damage will define Trump’s economic legacy.