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Industry Opinion
Are Higher Tariffs Going to Be a New Reality?
By Nironjan Roy, CPA, CMA — Certified Anti-money laundering Specialist and Banker
The trade war—which U.S. President Donald Trump, after coming to the White House for a second term, declared by imposing higher tariffs—is neither ending nor easing.
Over the last two years, threats to impose higher tariffs, similar responses from counterparts, negotiations, signing off on some agreements, and even court cases have all centered on the higher-tariffs issue, but the situation has not been normal. Rather, the new wave of higher tariffs has escalated, as recent negotiations with Canada have failed, inviting higher tariffs from both countries. When President Trump was moving ahead with the decision to raise tariffs, a perception developed that they would end after his departure, which is now gradually fading.
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Many business leaders now believe the higher tariffs imposed by President Trump will not end soon; instead, they may persist for a long time and become a regular feature of cross-border trade. However, some people think otherwise and argue that the situation may change in 2029, when President Trump's tenure ends and a new administration takes office. But some people who oppose this idea say that all politicians, regardless of party affiliation, need money, and President Trump has created a strong source for it; future presidents will follow. As reported in the media, one U.S. business leader was asked what will happen after Trump leaves office, and he responded, “Who knows?” He further said, “Politicians need to raise funds to pay for all the things that they do, and it’s hard for them to look at a stream of revenue and turn it down.”
Trump’s continued higher tariffs are becoming the norm. It is not only under discussion but also in action, as many businesspeople have started getting used to higher tariffs and their fluctuations. Many business sectors have begun preparing and developing strategies to operate under higher tariffs for an indefinite period, even after Trump leaves the White House. The automotive industry depends heavily on imports from China but is significantly affected by Trump’s 50% tariff. Both suppliers in China and importers in the USA have developed strategies to sustain themselves under long-term pressure from higher tariffs.
When Donald Trump became America’s President for the first time, he also imposed higher tariffs, which his successor, Joe Biden, did not overturn. However, the tariff rate during Trump’s first term was much lower than it is now. As reported in the media, the highest effective tariff rate, calculated by dividing total tariff revenue by total import value, was only 3% during Trump’s first term. In contrast, the effective tariff rate during Trump’s current tenure reached 11% and later dropped to around 7%. The higher effective tariff rate has compelled many companies to make major supply-chain changes and adjustments that are unlikely to be reversed. As part of long-term preparation, many importers have spent money relocating their supply sources from higher-tariff countries, including China, to lower-tariff countries.
Not only businesspeople but also consumers are living with the impact of higher tariffs, and they believe higher commodity prices resulting from those tariffs will become their new normal.
Trump’s continued higher tariffs are becoming the norm. It is not only under discussion but also in action, as many businesspeople have started getting used to higher tariffs and their fluctuations. Many business sectors have begun preparing and developing strategies to operate under higher tariffs for an indefinite period, even after Trump leaves the White House. The automotive industry depends heavily on imports from China but is significantly affected by Trump’s 50% tariff. Both suppliers in China and importers in the USA have developed strategies to sustain themselves under long-term pressure from higher tariffs.
When Donald Trump became America’s President for the first time, he also imposed higher tariffs, which his successor, Joe Biden, did not overturn. However, the tariff rate during Trump’s first term was much lower than it is now. As reported in the media, the highest effective tariff rate, calculated by dividing total tariff revenue by total import value, was only 3% during Trump’s first term. In contrast, the effective tariff rate during Trump’s current tenure reached 11% and later dropped to around 7%. The higher effective tariff rate has compelled many companies to make major supply-chain changes and adjustments that are unlikely to be reversed. As part of long-term preparation, many importers have spent money relocating their supply sources from higher-tariff countries, including China, to lower-tariff countries.
Not only businesspeople but also consumers are living with the impact of higher tariffs, and they believe higher commodity prices resulting from those tariffs will become their new normal.
Tariffs are different from other trade barriers.
This is a direct import duty added to the prices of goods and services, eventually borne by people in the tariff-imposing countries. In contrast, other trade barriers do not directly affect consumer costs. President Trump has declared a trade war to punish countries with an unfavorable trade deficit with the U.S., but Americans ultimately bear the pain of higher tariffs. Americans now believe these higher tariffs will not go away; instead, they will become a regular trade norm, so they are mentally prepared to pay higher prices. Most people have become part of a debt-ridden society, so they maintain the same standard of living while their debt rises. Consequently, the law of demand, which states that demand falls when price rises or vice versa, is not working to that extent. Therefore, people’s consumption does not appear to have declined, resulting in a fall in demand, and the same is true for business turnover, which has not declined in proportion to the tariff rise.
The presidential election to be held in 2028 is ‘knocking,’ but its formal campaign has not yet commenced. However, political leaders have started discussing the election with higher tariffs as the dominant issue. Potential candidates and political high-ups are talking about higher tariffs, without assurance of reversal. As reported in the media, Vice President J.D. Vance and Secretary of State Marco Rubio are outspoken supporters of higher tariffs, and both have described tariffs as a tool for bringing fairness to international trade.
Democrats’ frontrunners have strongly opposed this concept. California is the state that has sued the federal government over the duties, and its governor has openly termed higher tariffs an illegal cash grab. Former Vice President Kamala Harris has also said higher tariffs are raising the cost of living for Americans. Another political leader, who served as transportation Secretary during the previous administration, has alleged that higher tariffs have failed to increase manufacturing employment, which was cited as one of the prime objectives behind imposing them. However, the bottom line is that Trump’s higher tariffs are pouring $20 billion to $30 billion into the U.S. Treasury every month, which no government can ignore.
The President’s higher tariffs have been severely criticized and opposed but have not been reversed. Trump’s tariff decisions have been struck down by one court after another, but a new ruling with higher tariffs has come into effect. As higher tariffs continue to apply in international trade and with trading partners, and as consumers have started getting used to this new trading structure, it does not seem that higher tariffs will end soon, even after the change in the White House administration. The overall situation suggests that higher tariffs initiated by President Trump will be the new normal in cross-border trade. Contact: Nironjan Roy, CPA, CMA, CAMSCertified Anti-Money Laundering Specialist and BankerToronto, CanadaEmail: nironjankumar_roy@yahoo.com
The presidential election to be held in 2028 is ‘knocking,’ but its formal campaign has not yet commenced. However, political leaders have started discussing the election with higher tariffs as the dominant issue. Potential candidates and political high-ups are talking about higher tariffs, without assurance of reversal. As reported in the media, Vice President J.D. Vance and Secretary of State Marco Rubio are outspoken supporters of higher tariffs, and both have described tariffs as a tool for bringing fairness to international trade.
Democrats’ frontrunners have strongly opposed this concept. California is the state that has sued the federal government over the duties, and its governor has openly termed higher tariffs an illegal cash grab. Former Vice President Kamala Harris has also said higher tariffs are raising the cost of living for Americans. Another political leader, who served as transportation Secretary during the previous administration, has alleged that higher tariffs have failed to increase manufacturing employment, which was cited as one of the prime objectives behind imposing them. However, the bottom line is that Trump’s higher tariffs are pouring $20 billion to $30 billion into the U.S. Treasury every month, which no government can ignore.
The President’s higher tariffs have been severely criticized and opposed but have not been reversed. Trump’s tariff decisions have been struck down by one court after another, but a new ruling with higher tariffs has come into effect. As higher tariffs continue to apply in international trade and with trading partners, and as consumers have started getting used to this new trading structure, it does not seem that higher tariffs will end soon, even after the change in the White House administration. The overall situation suggests that higher tariffs initiated by President Trump will be the new normal in cross-border trade. Contact: Nironjan Roy, CPA, CMA, CAMSCertified Anti-Money Laundering Specialist and BankerToronto, CanadaEmail: nironjankumar_roy@yahoo.com