Donald Trump’s tariffs didn’t take America back to the golden age, but they pushed it into a dead end. 2025 was supposed to be the year of the end of globalization as we have known it. Instead, it was the year in which the United States discovered that protectionism can proceed in parallel with euphoric financial markets, without automatically translating into widespread prosperity for the real economy. In fact, perhaps the opposite. The S&P 500 index is set to close 2025 with a rise of close to 18 percent, double compared to expectations at the beginning of the year, while American families have another budget to deal with: the estimated loss of disposable income is up to 2,400 dollars a year.
The heart of Trump’s strategy is simple and primitive: using tariffs as a lever of power, forcing partners and rivals to bend, bringing production and work back within national borders. And then distribute those dividends, no one knows which ones and how, to the Americans. These are the dreams of the president of the United States; then there are the laws of economics and the harsh reality.
As the Financial Times explains with a series of graphsin just a few months the duty rate rose from historically low levels, around 2 percent, to a range between 14 and 18 percent, a level not seen since the mid-1930s and which even exceeds many estimates formulated after the salesman’s announcement during “Liberation Day”. Revenue from tariffs has actually increased a lot, topping $30 billion a month. It is a high figure compared to the past, but remains small compared to the size of the American economy and public finances. On an annual basis it means just over 350 billion dollars, compared to federal spending that exceeds 6,000 billion and a deficit that continues to grow.
Even maintaining current levels, tariffs would not be enough to significantly reduce the deficit, let alone fulfill Trump’s unachievable promise of an tariff checka $2,000 check to every American financed, according to the president of the United States, with the proceeds of tariffs. The idea is always strange, but interesting because it is an implicit admission: if it is necessary to return money to families, it means that the duties took it away first. Not to mention that the entire legal system of tariffs is now under examination by the Supreme Court, called to establish whether Trump has exceeded the powers delegated by Congress, using rules designed for limited or sectoral emergencies to impose generalized and permanent tariffs, effectively rewriting trade policy without a parliamentary vote. In the event of a negative ruling, Trumpians already have the perfect narrative ready: the checks will not arrive due to the Supreme Court’s fault.
The script is always the same, but perhaps the Americans are realizing the nonsense of the president of the United States who had assured that only foreign exporters would absorb the cost of these measures. But the ones who have done so, at least so far, have been above all American companies, who have compensated for the increase in costs by reducing margins and exploiting inventories accumulated before the entry into force of the duties, thanks to a massive advance in imports between the end of 2024 and spring 2025.
The decision to absorb the increase in costs linked to duties, avoiding immediately passing them on to final prices, attenuated the immediate impact on inflation and employment and gave the impression that the negative effects predicted by some economists had been exaggerated. The issue was only postponed for a few weeks. According to research by the National Bureau of Economic Research, starting from the spring the prices of goods affected by the tariffs began to grow visibly, with an average increase of more than 5 percent. This increase contributed approximately 0.7 percentage points to overall inflation. Over time, as businesses stop absorbing costs and start passing them on to consumers, the pressure on families’ real incomes is set to increase.
As the American economy slowly but broadly impoverishes, financial markets have reacted with surprising indifference. Having overcome the initial shock of April, when the announcement of tariffs burned around 2,500 billion dollars of global capitalization in a single session, Wall Street closed one of the best years in its recent history.
The stock market has learned how Trump acts and is betting on a now familiar script: extreme declarations followed by postponements, exemptions and partial agreements. The frequency of these changes has led investors to view tariffs more as a negotiating tool than as a structural change to the economy. The result is a reduction in the perception of systemic risk, but at the cost of something more profound: the erosion of confidence in the coherence and predictability of American economic policy.
This is where the dollar comes in. According to expectations at the beginning of the year, the duties should have strengthened it, making monetary policy more restrictive and attracting capital. The opposite happened. In the first six months of 2025, the dollar had one of the worst starts to a year in its recent history, losing more than 10 percent against a basket of major trading partners’ currencies. A trend that is all the more significant because it occurred in parallel with a strong rise in stock markets.
Foreign investors did not turn their backs on American assets, but began to behave differently: they hedged exchange rate risk more carefully and reduced net exposure to the dollar. It is a discontinuity compared to the recent past and a subtle but important signal: not an escape from US markets, but rather a cautious distancing.
Trump has not broken the backs of global trade, which as always happens, adapts. Of course, Chinese exports to the United States fell sharply, with a collapse of close to 20 percent on an annual basis, but Beijing’s overall trade surplus continued to grow, exceeding one trillion dollars for the first time, thanks to diversification towards Europe, Southeast Asia and the Gulf. Although, as we reported on Linkiestais not entirely good news for China.
Other countries have also adopted similar strategies, strengthening regional agreements and increasing mutual trade, without resorting to coordinated retaliation against Washington. This lack of a symmetrical response should not be read as a sign of weakness, but as the reflection of a world in which the weight of the American economy has decreased compared to the past and in which it is often more convenient to circumvent the obstacle than face it directly.
In summary: tariffs have not brought manufacturing back to the United States, despite promises of reshoring and targeted subsidies, they have not reduced the trade deficit, which continues to widen, they have not made Americans richer. Instead, they functioned as a hidden tax on consumption, disproportionately affecting low- and middle-income families, and contributed to undermining the dollar’s role as the undisputed linchpin of the global financial system. In short, much ado about nothing: a Shakespearean comedy, a Trumpian tragedy.
