When Donald Trump returned to the White House in January, his administration wasted no time in erecting a formidable wall of tariffs, fundamentally altering decades of established US trade policy. This aggressive shift, characterized by double-digit import taxes on goods from numerous countries, has sent ripples across global commerce, impacting both the budgets of households and businesses worldwide. While generating tens of billions of dollars for the US Treasury, these measures have also introduced significant turbulence into the economic landscape, making 2025 a year of notable economic shifts.
The President has consistently argued that these steep import taxes are essential to reclaim wealth he believes was “stolen” from the United States, aiming to narrow America’s long-standing trade deficit and revitalize domestic manufacturing. However, the disruption to global supply chains has come at a cost, with households experiencing rising prices. The unpredictable nature of the tariff rollouts—announcements followed by suspensions, alterations, and new impositions—contributed to the year’s economic volatility. A key metric for understanding the comprehensive impact on consumers and businesses is the “effective” tariff rate, which provides an average based on actual imports, differing from the headline figures. This rate, according to data from the Yale Budget Lab, peaked in April 2025 and remained significantly higher than at the year’s start. By November, the effective tariff rate stood at nearly 17%, a seven-fold increase over January’s average and the highest recorded since 1935.
One of Trump’s core justifications for his tariff policies was the dual promise of reducing the trade deficit and increasing government revenue. On the revenue front, the tariffs have indeed delivered, bringing in over $236 billion through November—a substantial increase compared to previous years. Yet, this figure represents only a fraction of the federal government’s total revenue, falling short of the President’s more ambitious claims that tariff revenue could replace federal income taxes or provide “windfall dividend checks” for Americans. The trade deficit, however, has seen a notable reduction. After reaching a monthly record of $136.4 billion in March, as consumers and businesses rushed to import goods ahead of impending tariffs, the trade gap narrowed significantly to $52.8 billion by September, the latest month for which data is available. Despite this monthly contraction, the year-to-date deficit for January-September 2025 was still 17% higher than the same period in 2024.
The broad sweep of Trump’s 2025 tariffs affected nearly every nation, including America’s most significant trading partners. The policies had a particularly profound impact on US trade relations with China. Once the largest source of American imports, China now ranks third, trailing Canada and Mexico. Tariffs on Chinese imports currently stand at 47.5%, as calculated by Chad Bown of the Peterson Institute for International Economics. This has led to a nearly 25% decline in the value of goods imported from China during the first three quarters of the year, with imports from Canada also decreasing. Conversely, imports from Mexico, Vietnam, and Taiwan saw an increase in value over the same period.
The financial markets reflected this uncertainty, with the stock market experiencing significant volatility coinciding with tariff-related developments. The S&P 500, a benchmark for major US public companies, recorded its most substantial daily and weekly fluctuations in April. March and June, respectively, marked the largest monthly losses and gains for the index, underscoring the market’s sensitivity to the administration’s trade maneuvers. These shifts illustrate the complex interplay between trade policy, global commerce, and domestic economic performance under the new tariff regime.
