When Donald Trump entered his second tenure as President of the United States in January 2025, he wasted no time reviving his signature “America First” economic policy. Central to this policy was the reintroduction of sweeping tariffs—starting with a 10% tariff on all Chinese imports announced on February 1, 2025. By March 4, Trump had doubled down, increasing the tariff rate on Chinese goods to 20%.
The aim? To protect American jobs and industries from foreign competition.
But there was an immediate and familiar consequence—China responded in kind.
China’s Retaliation: Hitting Where It Hurts
In a direct countermeasure, Beijing slapped its own tariffs on U.S. goods, announcing on March 4 that it would impose additional tariffs—15% on U.S. chicken, wheat, corn, and cotton, and 10% on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy—effective March 10, 2025.
This move mirrored China’s 2018 retaliation during Trump’s first term, when a trade war erupted between the world’s two largest economies. Back then, China’s retaliatory strategy had been laser-focused: target American agriculture, particularly farm exports from Republican-leaning states. The message was clear—China would not back down without a fight.
But just how much damage can these new tariffs really inflict on the U.S. economy? To understand that, we need to take a look back at the first Trump-era trade war.
A Look Back: What the First Trade War Taught Us
In 2018, under Trump’s first administration, the U.S. and China locked horns in a tit-for-tat tariff battle. The result? A dramatic increase in tariffs from both countries.
For context:
- In January 2018, U.S. tariffs on Chinese goods were at just 3.2%.
- By January 2020, they had soared to 21%.
- China’s tariffs on U.S. goods also jumped, from 8% in early 2018 to 21.8% in 2020.
What followed was economic pain on both sides—but let’s focus on the U.S.
Billions Lost in Agriculture
China had long been a major buyer of U.S. agricultural products. But with retaliatory tariffs in place, exports took a nosedive. Analysts estimate the U.S. agricultural sector lost more than $27 billion in export revenue within just 18 months.
Still, when seen in perspective, agriculture was a relatively small part of the overall U.S. economy. In 2018, the sector added just $180 billion in value to the nation’s over $20 trillion economy—less than 1%. So while the losses were significant for farmers, they didn’t cripple the national economy.
U.S. Exports to China Slump
U.S. exports to China dropped from $120 billion in 2018 to $107 billion in 2019. Yet total U.S. exports to the rest of the world remained stable. The decline wasn’t catastrophic, but it was noticeable, especially for industries reliant on Chinese buyers.
Slower Growth and Fewer Jobs
Perhaps the most telling impact was on broader economic indicators. The Congressional Budget Office estimated that tariffs and uncertainty shaved 0.3% off GDP growth in 2019. Other private forecasts placed the hit closer to 0.3–0.5% of GDP, amounting to $50–$100 billion in lost output and as many as 300,000 fewer jobs created.
Manufacturing—initially expected to benefit—actually declined due to rising input costs and retaliatory barriers abroad. By late 2019, the U.S. manufacturing sector had entered a mild recession.
Imports Shifted, Not Reduced
Trump’s tariffs aimed to reduce U.S. dependence on Chinese goods. Imports from China did fall—but they didn’t disappear. Instead, the U.S. began buying more from countries like Mexico and Vietnam. Graphs of merchandise imports show a brief dip in 2019 and 2020 (due to COVID-19), but trade bounced back afterward.
Trump’s 2025 Tariffs: A Repeat of History?
In 2025, Trump enacted even more aggressive tariffs—not just on China, but also on traditional partners like Canada and Mexico. One economist called it “the largest tax increase in at least a generation.”
The impact on U.S. consumers is also clear. According to data from the Peterson Institute for International Economics, households in the middle income quintile could face an extra $1,200 per year in costs due to these tariffs.
Meanwhile, China is once again retaliating.
Beijing has imposed new tariffs in the 20–25% range on a wide array of American farm products: soybeans, corn, wheat, sorghum, pork, beef, poultry, seafood, dairy, fruits, and vegetables. This strategy is nearly identical to that of 2018—hitting the heart of Trump’s rural political base.
Interestingly, the impact may be smaller this time. In 2024, U.S. exports of these agricultural products to China were only worth around $13.35 billion, a modest figure compared to total U.S. exports globally. It’s politically strategic, but not necessarily economically devastating.
Energy and Aerospace in the Crosshairs
China’s retaliation also includes tariffs on liquefied natural gas (LNG) and coal—two sectors where U.S. exports to China have traditionally been low. More symbolically, China is hinting at canceling or delaying orders of Boeing aircraft in favor of European rival Airbus, leveraging its power as a major buyer in the global aviation market.
What Will It Cost the U.S.?
While the full impact is still unfolding, projections from Moody’s Analytics paint a sobering picture under Trump’s 10% tariff scenario:
- Real GDP in 2025 could be 1% lower than it would be without tariffs.
- By 2028, the gap grows to 3.6% less than the baseline.
- Employment could fall by 3.5 million jobs compared to the no-tariff scenario by 2028.
Other forecasts differ in scale, but the direction is consistent—tariffs reduce economic growth, hurt employment, and burden consumers.
The Bottom Line
Trump’s second-term tariffs are following a familiar path: impose sweeping trade barriers, provoke retaliation from China, and hope to protect American industries in the process. But if the past is any indication, the outcome is likely to be mixed at best.
While certain domestic producers may benefit temporarily, the broader economy could suffer from slower growth, higher consumer prices, and lost jobs—especially if the trade war escalates. Meanwhile, China’s retaliation is once again carefully calculated to deliver both economic and political pain.
Ultimately, whether this new trade war will reshape global trade or simply repeat the past remains to be seen. But one thing is clear—the cost of tariffs extends far beyond balance sheets.