We know that Trump did what he loves most shortly after taking office: impose tariffs. He proudly announced that he would impose a 25% tariff on all steel and aluminum imports from around the world. He didn’t stop there. He also threatened countries with an additional 25% tariff on imported copper.
Naturally, this didn’t sit well with America’s major trading partners. In response, the EU, Canada, and China imposed retaliatory tariffs on US imports. But Trump wasn’t ready to give up just yet, so he made it clear that the US would impose reciprocal tariffs on any trading partner that would mirror the tariffs imposed on US products. But before we go any further, let me give you a quick rundown of what tariffs are and how they work.
Tariffs are essentially taxes imposed on imported goods. Companies that bring foreign goods into the country pay the government a percentage of the value of the product as a tax. For example, a 25% tariff on European goods would mean that a $10 product would incur an additional $2.50 fee, which would cost US consumers $12.50. Now, tariffs are essentially an economic tool designed to protect local industries from cheaper imports. Because companies can choose to pass on some or all of the tariffs to customers, this makes imported goods more expensive and forces customers to opt for cheaper, locally produced alternatives.
But there can be a downside to this. Imported goods may be more functional than homemade ones because they were not manufactured very efficiently to begin with, and something similar is happening in the US right now.
Trump’s new tariffs could increase consumer prices in the US and around the world. This is exactly what gives economists sleepless nights. So why is he so determined to impose them, you might ask?
For Trump, tariffs are a way to boost US manufacturing, protect jobs, increase tax revenue, and grow the domestic economy. When the tariffs go into effect, Trump also aims to restore the balance of trade with America’s foreign partners. He is particularly focused on the EU, where the US has a $213 billion trade deficit in 2024, a move he once called “an atrocity.”
But last week, something ironic happened. The US Department of Agriculture demanded that some EU countries, including Denmark, Sweden, Finland, the Netherlands and Lithuania, export eggs to the US. That’s because bird flu has wiped out millions of chickens, causing a massive egg shortage and skyrocketing prices in the US. And it caused a kind of celebration on European social media, mocking Trump and calling his request “door-to-door begging.” It looks like Trump needs to eat humble pie.
Just a few days ago, he was threatening the EU with tariffs, and now the US needs European eggs. But the bigger takeaway here is that we live in a deeply interconnected world where trade between countries and continents is essential. That’s where tariffs come in. They may seem like a protective shield, but they often come with hidden costs.
Consider Trump’s proposed 25% tariff on copper. It’s already causing market volatility. The London Metal Exchange (LME), a major commodity exchange for industrial metals, has seen copper prices rise above $10,000 per ton. Meanwhile, traders in New York are scrambling to secure copper supplies, pushing up prices on the Commodity Exchange (Comex), the primary futures and options market for metals in the U.S. The price difference between LME and Comex copper futures has reached a record $1,254 per ton. What does that mean?
Look, copper is a critical raw material used in technology, construction, and renewable energy. The price hike would mean higher costs for everything from electric vehicles to power grids, making domestic industries in the U.S. less competitive. Additionally, U.S. producers importing copper would have to absorb the extra cost or pass it on to consumers—the very people Trump aims to protect.
But that’s not all. While Comex warehouse stocks are increasing, LME warehouse stocks are depleting. This suggests that traders are moving the metal from London to the US to avoid future tariffs. So in the short term, Trump’s trade policy provides an incentive to stock up on copper before the tariffs come. And in the long term, this could choke off supply and create an artificial scarcity, pushing prices even higher. Let’s not forget the past.
Trump’s 2018 tariffs on steel and aluminum did help to boost manufacturing jobs. For example, a study in the American Economic Review found that tariffs on washing machines created an estimated 1,800 jobs at companies like Samsung. But they also came at a significant cost to the economy. These tariffs also increased costs for U.S. businesses, disrupted supply chains, and invited retaliation from trading partners like China and the EU, which in turn increased the price of washing machines for consumers. Consumers paid $1.5 billion more for washing machines each year. Or, to put it another way, each new job cost the economy more than $800,000 on average because of the higher prices. Copper could suffer a similar fate, hurting U.S. manufacturers more than it helped.
There are other examples of tariffs in the past where tariffs have had unexpected consequences. Consider the infamous Chicken Tax. In the early 1960s, American poultry farmers adopted industrial-scale production, reducing costs and thus flooding European markets with cheap chicken. This did not sit well with European farmers, especially in France and Germany, who had difficulty competing. So they imposed heavy tariffs on American chicken imports to protect their domestic poultry industries.
Angered by what they saw as an unfair trade barrier, the U.S. imposed a 25% tariff on light trucks and several other products exported to the U.S. by the same European countries. The truck tariff hit the EU hard, especially Germany’s Volkswagen, whose pickup trucks were gaining popularity in the U.S. And a dispute over chicken escalated into what became known as the Chicken War.
At the time, the goal was to protect American automakers from the rise of small, fuel-efficient European vehicles. But decades later, the Chicken Tax distorted the U.S. auto market in ways no one had anticipated. First, it made foreign trucks significantly more expensive, giving domestic manufacturers like Ford, General Motors, and Stellantis a near-monopoly in the segment. And while that may seem like a win for the U.S. auto industry, it also eliminated competitive pressure that could have led to better innovation and pricing.
And to combat tariff barriers, some foreign automakers have resorted to bizarre loopholes, like shipping their trucks as passenger vehicles and modifying them once they arrive in the U.S. to avoid tariffs.
The result is higher costs, inefficiencies, and a market that thrives on artificial government intervention, not consumer demand. So while tariffs may seem like a powerful economic tool in the short term, history has shown that they often come with unexpected costs.
The irony couldn’t be clearer as Trump looks to tighten trade restrictions while simultaneously searching for European eggs. Tariffs may seem like a shield for domestic industries, but they can also often become self-inflicted wounds.
