Some Americans worry that President Trump’s tariffs will raise prices and stoke inflation. But others are skeptical. Didn’t Trump impose tariffs during his first presidential term? There was no inflation then, was there?
The skepticism is fair. Trump did impose tariffs on imports during his first presidential term, in 2018 and 2019. Trade partners retaliated and a trade war simmered. Inflation during that time averaged a tame 2.2% and never exceeded 2.9%. The US economy grew modestly until the COVID pandemic arrived in March of 2020.
Trump’s early tariffs did cause damage, however — and analysts are now revisiting the details as they try to gauge the impact of the more aggressive tariffs Trump plans to levy in coming months.
Trump was relatively careful with tariffs during his first term. He didn’t get started until his second year in office, and the tariffs that went into effect were far lower than what he threatened. There were numerous exemptions and workarounds. For the most part, Trump avoided tariffs that would have directly raised the cost of finished goods in ways consumers would notice.
Yet those early tariffs did harm corners of the economy in ways that could be more widespread if Trump goes further during his second term, as he says he will.
US manufacturing output declined after Trump began his trade war in 2018. Blue-collar employment dipped and some US producers had to eat higher costs. In some ways, the damage was the cost of what didn’t happen, given that output and employment would have been higher without the tariffs. And some products clearly got more expensive, even if it was only small groups of unlucky purchasers who actually noticed.
When Joe Biden became president, he removed most of the Trump tariffs, with a notable exception being those on Chinese imports. Biden focused far more narrowly on specific products, putting a 100% tariff on Chinese electric vehicles, for example. Trump is now returning to a broader, across-the-board tariff regime, prompting many hurried reviews of Trump's first go at tariffs.
Early in 2018, Trump imposed targeted tariffs on imported solar panels and washing machines. A couple of months later came tariffs on imported steel and aluminum. Then several times in 2018 and 2019, Trump hit Chinese imports with tariffs.
Many trade partners, including China, Canada, Mexico, Turkey, South Korea, and the European Union, retaliated with their own punitive measures on imports from the United States. In many instances, Trump changed tariff rates, established exemptions, or made other changes to tweak the impact of his trade war. He also sent relief funds to American farmers suddenly unable to sell in foreign markets due to trade war retaliation.
The economy as a whole didn’t crash, but there were plenty of pain points. “After the 2018 tariffs were put in place, there was a sharp downturn in domestic manufacturing activity in the US,” Morgan Stanley pointed out in a recent analysis. Industrial output, which generally grew from 2016 to 2018, peaked in August of 2018, right around the time Trump’s first China tariffs went into effect. From that point, it declined into 2020.
Manufacturing employment followed a similar trend, growing from 2016 to 2018, then flatlining in 2019 and declining by the end of that year. Trump’s tariffs mostly covered components and industrial goods, pushing costs higher for American producers, so it’s logical that output would dip as costs rose.
The drop in blue-collar employment from the 2019 peak to the eve of COVID, for instance, was just 47,000 workers in a labor force of more than 160 million. Yet one of Trump’s stated purposes for the tariffs was to boost US manufacturing, and now that the facts are in, we know that didn’t happen.
Some industries benefited, as Trump intended. But others suffered as a result.
The Peterson Institute for International Economics found that Trump’s steel tariffs pushed steel prices about 9% higher in 2018. That boosted domestic steel firms’ pre-tax profits by $2.4 billion and helped create 8,700 steel jobs. But it also added $5.6 billion in higher costs for companies that purchase steel, such as auto and appliance makers. On net, the cost associated with each new steel job was nearly $650,000, which would be a very poor return if the tariffs were considered a subsidy program.
Tariffs are a kind of economic Russian roulette in which random victims take the bullet. In 2018, the EU boosted its tariffs on Harley-Davidson motorcycles in response to Trump’s steel and aluminum tariffs. That added $2,200 to the cost of American-made bikes sold in Europe. To evade the tariff, Harley moved production of Europe-bound products to Thailand — which drew Trump’s ire. The turmoil added $40 million to Harley’s costs in 2018 and shaved more than $1 billion off its market value.
Trump’s steel tariffs forced a Missouri company called Mid-Continent Steel and Wire to raise the price of nails in 2018 since the price it had to pay for steel rose. Customers balked, sales dropped by half, and the company laid off 80 workers before the Trump administration offered it an exemption from the tariff on imported steel. The same year, Ford said the higher cost of metal forced it to cut profit-sharing bonuses for workers by $750 and General Motors said the tariffs cut its annual profit by $1 billion.
Anybody who bought a washer or dryer between 2018 and 2023 probably paid a tariff premium, whether they realized it or not. One of Trump’s first tariff moves in 2018 was a 20% to 50% levy on most imported washing machines, which stayed in place until 2023. During that time, the cost of laundry equipment rose by 34%, while overall inflation was just 21%. On a per-unit basis, the tariff boosted the retail cost of a washer by about $90, whether it was imported or made in the USA. That’s because tariffs that make imported products costlier give domestic producers pricing power, which they normally wield aggressively.
So the 2018 and 2019 Trump tariffs did pockmark the US economy, with the severity of the damage depending on how vulnerable businesses and consumers were to product categories Trump chose to target. Many Americans skirted the tariff impact altogether, but the harm was tangible to those vulnerable to the rising cost of imports.
Will washing machines cost more again? A washing machine is displayed at the Bosch booth ahead of the upcoming International Radio Exhibition, IFA, an innovation and technology trade fair in consumer electronics and home appliances in Berlin, Germany September 5, 2024. (Photo" REUTERS/Annegret Hilse) ·REUTERS / Reuters
Trump’s second shot at tariffs could be more widespread than his first. He has hit the ground running this time with two sets of tariffs during his first month: a 10% levy on all Chinese imports and a 25% tax on most imported steel and aluminum. Trump says he’s still planning tariffs on Mexican and Canadian imports, on certain imported cars, semiconductors, and pharmaceuticals — and on countries that have higher tariff rates on US imports than the United States has on theirs.
Forecasters tend to agree. Goldman Sachs says the full tranche of Trump tariffs would boost inflation by about 0.7 percentage points. If all of Trump’s tariffs go into effect, it would raise the average tax on $4 trillion worth of imports from 2.5% to 7%, according to the Tax Foundation. That would be about $130 billion in higher costs borne by American businesses and consumers, not counting the impact of any retaliation by trading partners.
Is $130 billion in higher costs a lot in a $29 trillion economy? Many Americans might not notice much of a change. But some would face sudden difficulties and wonder what the point is.
Only Trump can explain.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
