Trump 2.0: How Effective Is U.S. Tariff Policy?

“Tariff is the most beautiful word in the dictionary” claimed President Trump during his second run for the White House, clearly expressing the central role that tariffs would play as cornerstones of the new administration’s foreign policy strategy.
Expectations were certainly not disappointed: since taking office, President Trump has strongly relaunched a return to a stricter protectionist policy, pursuing multiple objectives at the same time—economic, political-negotiation, and redefinition of bilateral foreign relations.
In assessing the first nine months of Trump’s second term, and the major comeback of U.S. protectionism, it is useful to evaluate the effectiveness of these policies, especially in relation to the stated economic goals, which can be summarized in two main points:

• an increase in federal revenues to address the growing public deficit caused by the Big Beautiful Bill, approved last July, and the planned tax cuts;
• a recovery of U.S. manufacturing capacity and a rebalancing of the trade balance deficit, through improved price competitiveness of domestically produced goods, in order to limit—or even reverse—the process of industrial decline.

To this end, the release of updated foreign trade data for the third quarter of 2025 by ExportPlanning allows for a first assessment of the effectiveness of the Trump 2.0 tariff policy, specifically with respect to the two economic objectives outlined above.

Increase in Federal Revenues

President Trump has repeatedly emphasized that tariff revenues are necessary to address the budget deficit. In fact, from the beginning of the year to July 2025, tariff-related fiscal revenue is estimated at $122 billion—more than double the figure for the same period in 2024.

While in the first two months of 2025 monthly tariff revenues were around $7 billion—consistent with the monthly average of the previous year—starting in March, with the first executive orders, they rose rapidly, reaching nearly $30 billion in July. Notably, more than two-thirds of recent revenues are linked to tariffs on goods imported from China and Asia.

Fig.1 - U.S. fiscal revenues from import tariffs

Source: ExportPlanning elaborations

Tariffs are therefore certainly generating higher fiscal revenues for the United States; however, when compared to the federal deficit, they account for less than 10%. Specifically, the U.S. deficit is expected to improve from $1.915 trillion in 2024 to $1.8 trillion in 2025, thanks to higher tariff revenues—a marginal improvement, and one unlikely to offset the projected deficit growth in the coming years as a result of lower average direct tax rates introduced by the Big Beautiful Bill.

A second point that needs to be clarified is that the entity responsible for paying tariffs at customs is the U.S. importer, who is the economic operator on whom the tax actually falls. Foreign firms exporting to the U.S. may experience an indirect negative effect (through potential declines in demand or profit margins), but they are not the entities that physically pay the tax—contrary to what is often implied by the U.S. administration’s narrative.

Recovery of the U.S. Manufacturing Industry

In the United States, overall manufacturing output has never fully recovered to pre-Great Recession levels, as clearly illustrated in the chart below. Although this is a phenomenon shared by several advanced economies, it is not surprising that the promise to revive American manufacturing has resonated strongly with the U.S. electorate.

Fig.2 - Total manufacturing output

Source: FRED

An indirect indication of the effects of U.S. protectionist policy on a potential manufacturing rebound can be drawn from the combined analysis of the dynamics of goods imports and the trend in average import prices. Specifically, evidence of declining import volumes accompanied by falling average unit prices could be interpreted as a sign of foreign producers struggling to maintain their market shares in the United States. In such a situation, foreign suppliers, in an effort to remain competitive, would be forced to accept reduced profit margins to partially offset the effect of tariffs on final prices.

Conversely, a simultaneous increase in both import volumes and average prices would suggest that the competitiveness gap of U.S. firms is not primarily due to price factors, but rather to structural issues—on which higher tariffs would have only a marginal influence.

Before analyzing recent U.S. import trends, it is necessary to adjust the data for a significant anomaly observed in the first quarter of 2025, during which U.S. imports, at constant prices, rose by 12% compared to the fourth quarter of 2024 and by 25% compared to the first quarter of 2024.

A breakdown by product category and partner country shows that this increase is attributable to a set of factors, including exceptional flows that temporarily distorted the overall import trend. In particular, as noted in the article Le importazioni USA nel I trimestre 2025: Oro, Farmaci e Tecnologia trainano gli scambi (https://www.exportplanning.com/it/magazine/article/2025/05/14/le-importazioni-usa-nel-i-trimestre-2025-oro-farmaci-e-tecnologia-trainano-gli-scambi/), the main anomalies concerned:

• extraordinary imports of fabricated precious metals n.e.c. (mainly gold for investment and industrial purposes) from Australia and especially Switzerland, amounting to about $45 billion in a single quarter;
• a sharp increase in pharmaceutical imports from Switzerland, Germany, and Ireland;
• exceptional flows of basic pharmaceutical products from Ireland exceeding $35 billion.

The historical trend of these flows, shown in the following chart, clearly highlights the exceptional and episodic nature of the anomaly recorded in the first quarter of 2025.
The observed peak is well beyond the levels that have characterized these flows over the past fifteen years, confirming that it was an isolated event not related to normal market dynamics. Consequently, this anomaly must be neutralized in the analysis to avoid distortions in assessing the structural trends of U.S. imports.

Fig.3 - U.S. imports of anomalous flows in Q1 2025

Source: ExportPlanning elaborations

After excluding anomalous flows, the change in total U.S. imports at constant prices in the first quarter of 2025 drops to 0.3% compared to the previous quarter and 10.2% compared to the first quarter of 2024.

For a more accurate assessment of ongoing dynamics, the following two charts show quarterly (quarter-on-quarter) changes in U.S. imports, both at constant prices and in terms of average prices, adjusted for the effect of exceptional flows.

Fig.4 - U.S. imports adjusted for anomalous flows

Source: ExportPlanning elaborations

After a slight decline in imported quantities in the second quarter, the third quarter shows a rebound in import volumes. On the price side, the signal—confirmed over two consecutive quarters—is one of rising prices.
These findings suggest that the competitiveness gap of U.S. firms stems more from structural factors than from price differentials, and that tariff measures are showing only a limited impact in revitalizing domestic manufacturing.
On the other hand, it is very unlikely that protectionist measures could alter U.S. manufacturing capacity in the short term. It is reasonable to assume that American firms, where possible, will focus primarily on maximizing the use of existing facilities, while the effects of any new foreign direct investments will take years to materialize.

Conclusions

The results currently available should be considered preliminary and will require further analytical investigation. However, based on the current evidence, the new Trump administration’s trade policy appears to be of limited effectiveness with respect to its two stated economic objectives. It should be emphasized that this assessment does not imply an overall judgment on the policy’s effectiveness regarding other non-economic objectives, such as geopolitical or strategic ones, which fall outside the scope of this analysis.