What Trump Trade Policy Has Achieved Since ‘Liberation Day’

President Donald Trump announced on April 2, so-called Liberation Day, that his administration would impose an expansive new slate of reciprocal tariffs on about sixty countries or trading blocs that held a high trade deficit with the United States—laying out the most significant U.S. tariff increase in nearly a century. 

While the administration announced a week later that these tariffs would be paused for ninety days (apart from a 10 percent base rate) to allow time for negotiations, the tariff strategy has shaken financial markets and U.S. trade relationships. It also has had major implications for five trade policy objectives that the administration has at various times cited for the tariffs: 1) returning manufacturing to the United States, 2) reducing U.S. trade deficits, 3) addressing unfair trade practices, 4) protecting national security, and 5) raising revenue. 

With the initial ninety-day pause expiring this week, CFR convened ten of its trade and economic experts to assess how Trump’s tariff policies have affected or will affect the United States and the president’s policy goals.

Did Trump's Tariff Pause Deliver Trade Deals?

Inu Manak
CFR fellow for trade policy

The Trump administration imposed a tight deadline to conclude talks with many countries in an effort to avoid imposing the steepest tariffs that the president announced on April 2. As the ninety-day period draws to a close, Trump has simply verified what trade experts already know: negotiating trade agreements is tough, and it takes time. 

The outcomes so far seem to be a fraction of the big “beautiful” deals that were promised months ago, so the administration is pivoting its position yet again, moving the negotiating deadline to the beginning of August. Treasury Secretary Scott Bessent cited “congestion going into the home stretch” as the reason for moving the deadline, arguing that the delay gave the president “maximum leverage.” But the most likely reason for it is the administration wants to avoid the negative market reaction they triggered on April 2.

The lack of deals rolling in puts any leverage in doubt, and it suggests that trading partners are hesitant to sign on to terms that could make them worse off than a few months ago. The early trade agreements show why other negotiating countries might think this.

The first deal, concluded with the United Kingdom on May 8, is a framework for future talks. It resolved a few trade irritants, but it kept a 10 percent across-the-board tariff in place. A second deal was reached with Vietnam on July 2, but details on its terms are unclear, with no text yet released. Trump claimed on social media that imports from Vietnam would now face 20 percent tariffs, essentially doubling the rate imposed on April 5, though still lower than the 46 percent country-specific “reciprocal” tariff proposed on “Liberation Day.” Vietnam also agreed to reduce its tariff barriers to zero, which Steven Miran, chair of the Council of Economic Advisors touted as “fantastic” because “it’s extremely one-sided.”

Trading partners have plenty of other reasons to proceed cautiously. With no new deals announced as his self-imposed deadline loomed, President Trump posted on Truth Social that countries would conclude their U.S. trade deals by noon on July 7 or receive a letter with their new tariff rate. A few hours after that deadline, Trump shared several letters sent to Japan, Kazakhstan, Laos, Malaysia, Myanmar, South Africa, and South Korea that appear to threaten increased tariffs of up to 40 percent in some cases and added levies on goods that are transshipped through the countries if they don’t agree to a deal by August 1. The letters also promise even higher tariffs if the countries retaliate.

These don’t really sound like true trade negotiations, where countries exchange reciprocal offers and concessions. Instead, it points to why the administration has struggled to close a greater number of deals—both sides have a very different understanding of the end goal. U.S. trading partners want to bring their economic relationship back to more stable ground, whereas the Trump administration wants to maintain persistent uncertainty to extract even more concessions over the next few years.

The constantly changing tariffs and shifting deadlines may get countries to the table, but very few will tackle comprehensive trade issues if the Trump administration cannot guarantee that the trade chaos will come to an end.

Read Inu Manak’s longer assessment of the progress Trump has made on trade deals since "Liberation Day" by clicking here.

Financial Market Lessons Since ‘Liberation Day’

Rebecca Patterson
CFR senior fellow and globally recognized investor and macro-economic researcher

Financial market reactions to Trump’s “Liberation Day” tariffs on April 2 and their ninety-day pause a week later have raised questions about fundamental macro-economic assumptions, including the dollar’s role as the world’s reserve currency and U.S. Treasury bonds’ ability to provide reliable portfolio diversification.

It’s way too soon to fully understand these financial ripple effects—after all, U.S. trade policy continues to evolve. Further, financial market outlooks must incorporate a myriad of other factors like fiscal and monetary policy trends as well as technological innovation, asset valuations, and investor positioning.

But even with these significant caveats, there are useful lessons to consider from the last ninety days that could help households and businesses understand where markets could be headed as well as the economic feedback loops that influence policy decisions in the United States and overseas.

Lesson One: U.S. financial market exceptionalism should not be taken for granted. The brief spurt of U.S. asset selling in April showed that American markets can be influenced by policy decisions and foreign investor reactions.

Lesson Two: Shifts in U.S. asset holdings can come in different shapes and over different time frames. Foreign investors can trim U.S. asset exposures, but they can also hold onto assets and simply hedge out the currency risk—resulting in a weaker dollar. Moving assets away from the United States also can take several quarters, especially for large institutions with board oversight. Just because U.S. equities gained into the end of the second quarter doesn’t mean foreign investors are finished shifting portfolios.

Lesson Three: Alternatives to U.S. assets need to be considered as dynamic, relative opportunities. Even if the United States is a bigger, faster growing economy, global peers may be seen as more attractive due to sentiment shifts around growth and less demanding valuations. For example, the German DAX equity index gained 30 percent in Euro terms through June 20 while the S&P 500 index only saw a 1.5 percent return.

Lesson Four: U.S. trade policy has illustrated the many links between financial markets, economic trends, and policy decisions. Switzerland would have been less likely to cut policy interest rates to zero if dollar weakness and global policy uncertainty hadn’t strengthened the Swiss franc so aggressively. Similarly, despite external factors such as Middle East conflict that typically pull bond yields lower, the hold placed on U.S. monetary policy—largely in response to tariff uncertainty—has provided a measure of support for longer-term Treasury bond yields. Higher yields increase government debt-servicing costs as well as household mortgage rates.

Read Rebecca Patterson’s longer assessment of how markets have fluctuated since Trump’s so-called Liberation Day by clicking here.

China Is Charging Ahead in the Trade Conflict

Zongyuan Zoe Liu
Maurice R. Greenberg senior fellow for China Studies

The latest U.S.-China trade talks in Geneva and London offered little more than a diplomatic smoke break. Despite the Trump administration’s attempts to spin “success,” the scoreboard is clear—Beijing is winning.

Since 2018, the world’s two largest economies have been embroiled in a prolonged trade conflict. China deployed a dual-track playbook that is both defensive and offensive. It diversified trade routes, reduced dollar dependence, boosted domestic consumption, and poured capital into technological research and development Meanwhile, Beijing tightened export controls and showed it could retaliate fast and precisely.

Trump’s tariff theatrics exposed U.S. vulnerabilities and handed Beijing a strategic edge. China gained experience how to weaponize export controls and inflict pain on American industries. For many in the developing world, China’s resilience under pressure validated Chinese President Xi Jinping’s claim that the world is undergoing “unseen changes in a century.”

From Beijing’s view, Washington’s efforts to stifle China’s rise only deepen the resolve to decouple. China doesn’t want a trade war, but it’s ready for one. Leaders and entrepreneurs in China are doubling down on self-reliance, even if the U.S. market remains hard to replace. But losing access to something you never truly had is not a terrifying prospect.

Yes, tariffs sting. They hit low-end manufacturing—apparel, footwear, the usual suspects—but shrinking exports could accelerate industrial consolidation and boost efficiency. China has weathered worse. In the 1990s, it absorbed forty million layoffs during state-owned enterprise reforms. Today’s factories are more automated. The Party isn’t panicking.

The deeper effect of Trump’s trade war? It turbocharged China’s tech ambitions. Just as the assault on Huawei lit a fire under innovation, renewed restrictions have made it easier for Party leaders to rally the nation against foreign humiliation. The tariff pause is just time to rush goods out—not détente.

As 2025 closes China’s 14th Five-Year Plan, policymakers are cushioning the economy with stimulus, but the real bet is on tech. Artificial intelligence-powered manufacturing ecosystems are the new frontier. It’s a high-stakes gamble, but it’s the only game in town for a nation boxed in by American pressure.

Will Trump Bring Manufacturing Back to the United States? 

Shannon K. O'Neil
Senior vice president, director of studies, and Maurice R. Greenberg chair at the Council on Foreign Relations

One of the stated goals of Trump’s tariff policy is to bring manufacturing jobs back to the United States. The number of jobs in these sectors has fallen from seventeen million to thirteen million over the last thirty years, even as overall manufacturing output has grown.

It’s far too early to tell whether tariffs will change this dynamic. Companies are now looking to get more out of the factories and facilities they already have, upping the use of existing production lines and workforces. Meanwhile, the hundreds of billions of dollars in new foreign direct investments that companies have pledged will take years to materialize and could depend on the investment climate.

Shifting supply chains can take months—or years—depending on the industry. Textiles, for example, tend to move faster due to fewer suppliers, shorter seasonal contracts, and less regulation. In contrast, autos are among the slowest to shift, as all of the “Big Three” American carmakers (Ford, General Motors, and Chrysler) have locked-in contracts with parts and component makers through 2028. Aerospace and pharmaceuticals can take years to open new factories due to intricate regulatory procedures and approvals, given safety concerns.

Blanket tariffs may inadvertently slow reshoring and job creation in the United States. To set up new factories and facilities, companies need steel, aluminum, machinery, and other components, many of which today come from abroad. Economy-wide tariffs layer additional costs to the uncertainty of moving operations.

Labor shortages add to the challenge. The United States is near full employment, and restrictive immigration policies mean there are fewer workers waiting in the wings. Adding more factory jobs would mean pulling employees away from other sectors, and this will be harder than it seems. A survey from Deloitte and the Manufacturing Institute finds that Americans rank manufacturing jobs fifth out of seven industry career choices, preferring technology, healthcare, energy and other fields. 

In the longer term, increasing American manufacturing jobs will likely depend on how connected to and competitive U.S.-made products are in global markets. While U.S. consumers are among the world’s wealthiest, they represent just 266 million of the 4 billion people in the global consumer class—those who spend at least $12 per day. If tariffs price American-made goods out of international markets, manufacturing jobs could shrink instead of grow over time. 

In the end, bolstering trade will determine whether U.S. manufacturing jobs thrive. And most important for the future of U.S. manufacturing is the U.S.-Mexico-Canada Agreement (USMCA), as deeply embedded North American production enables the economies of scale and specialization to make high quality and affordable goods, and it gives U.S. suppliers access to more global customers than they have on their own.

Julia Huesa and Gabriela Paz-Soldan contributed.

Will Tariffs Reduce the U.S. Trade Deficit?

Brad W. Setser
CFR Whitney Shepardson senior fellow

It may come as a surprise that tariffs have almost no effect on the trade deficit, according to economic theory. A tax on imports is, in classic models, also a tax on exports. It essentially results in a country’s trading partner having less money to buy the tariffing country’s goods. In more complex models, tariffs raise the cost of inputs that go into exports and prompt retaliation that directly reduces exports.

A quick survey of large economies shows that there is also no real correlation between the level of tariffs and the trade balance. The US has had—until recently—low tariffs and a trade deficit. The EU has low tariffs and a trade surplus. India has high tariffs and a trade deficit. China has high tariffs and a trade surplus. What appears to matter far more is a country’s savings rate, level of consumption, fiscal stance, and the strength of its currency.

If President Trump had used tariff revenue to drive a significant fiscal consolidation that reduced the budget deficit, he could have conceivably brought the trade deficit down as well. But it looks like tariff revenue will offset the front-loaded tax cuts in the Big Beautiful Bill. That leaves us with no reason to expect—absent monetary policy decisions that lead to a big move in the dollar—any reduction in the trade deficit from the tariffs. Simply put, a fiscal deficit that is credibly forecast to be over 6 percent of GDP and could approach 7 percent of GDP is inconsistent with a large fall in the trade deficit.

In fact, the tariffs to date and the threat of future tariffs have unambiguously increased the trade deficit. Through the first five months of the year, the trade deficit in goods is $175 billion bigger than it was at this point last year ($650 billion as of May 2025 compared to $475 billion in May 2024). 

This is because importers—particularly importers of pharmaceuticals from places like Ireland, Singapore, and Switzerland—rushed their drugs into the United States in advance of the tariffs. Pharmaceutical company Eli Lilly, for example, sped up imports of its weight loss drug from its Irish factory to the United States. Over time, this inventory buildup will likely be drawn down, bringing the trade deficit back to its trend levels. For now, though, the U.S. trade deficit is significantly larger than it was in 2024.

Have Tariffs Curbed Trade Barriers and Unfair Practices?

Edward Alden
CFR senior fellow, specializing in U.S. economic competitiveness, trade, and immigration policy

The United States has long perceived itself as a relatively open economy in which its exporters are victimized by foreign trade barriers. Through a variety of tools—international and regional negotiations, bilateral talks, tariff threats, and even new tariffs—presidents have long tried to reduce or eliminate these barriers to U.S. global commerce.

One reason markets have so far shrugged off Trump’s tariffs is that such pressure tactics, while unprecedented in their scope, are familiar. Investors are banking on the tariffs being part of a larger bargaining strategy that will eventually lead to fewer barriers to global commerce. 

Such confidence is unwarranted. Trump has now governed for four and a half years, and his record shows little success in reducing foreign trade barriers. In his first term, U.S. companies exporting to China were left worse off than they would have been without a deal. They faced higher tariffs on products in both directions, and there was little progress in removing discriminatory Chinese practices like intellectual property theft or forced technology transfer. Other deals largely left the status quo intact with trading partners in Canada, Mexico, Japan, and Europe.

Can Trump’s more aggressive tariff threats in the second term yield better results? So far, there is little reason to think so. Deals with China have mostly restored the status quo, but with still higher tariffs. An agreement with the United Kingdom will open some new opportunities, but they were not high on anyone’s list of “unfair” traders. Pressure on Canada, which sends 75 percent of its exports to the United States, has forced the new Liberal government to back down on its digital services tax that the U.S. government argues discriminates against large American companies like Meta. But tariffs remain much higher on products moving both ways across the border.

Additional deals would be welcome, but there seems little hope that unfair foreign trade practices will be reduced in any meaningful way. Instead, by imposing and likely maintaining the highest U.S. tariffs since the 1930s, the United States will have switched sides, firmly entrenching itself as among the worst of the “unfair traders.”

Read Edward Alden's longer assessment of the effect tariffs have had had on trade barriers and unfair practices by clicking here. 

‘National Security’ Tariff Justifications Are on the Rise

Benn Steil
CFR senior fellow and director of international economics

Owing to their enormous size and scope, President Trump’s “Liberation Day” tariffs were a shock to global markets. But seen as a point on a timeline, they represented a mere acceleration of a long-established trend: presidents using “emergencies” and “national security” as pretexts for arrogating unlimited tariffing and other economic powers from Congress.

The president imposed these massive tariffs, swamping those authorized under the notorious Smoot-Hawley Act of 1930 (though mostly suspended pending ninety days of bilateral negotiations), under executive authority conferred by the 1977 International Emergency Economic Powers Act (IEEPA). Trump claimed that long-standing U.S. trade deficits constituted such an “emergency.”

As shown in the figure below, ongoing “emergency” declarations under IEEPA have risen dramatically since the mid-1980s, accelerating after Trump’s 2017 inauguration.

Now that the Court of International Trade has rejected the president’s claimed tariffing authority under IEEPA, however, he may, depending on the course of the appeals process, be obliged to seek alternative authority to reimpose them.

Fortunately for him, that authority exists—though in a mildly diluted form, requiring consultation and transparency—in the form of Section 232 of the (inaptly named) Trade Expansion Act of 1962. Section 232 tariffs are justified by impairments to U.S. “national security”—which sounds a lot like an “emergency.”

As shown in the figure below, annual U.S. imports tariffed under Section 232 (as measured by prior-year values) have soared from nothing before Trump’s first term to nearly $150 billion. If the IEEPA tariffs are wholly or partially rolled back, Section 232 tariffs can be expected to rise commensurately.

On the international stage, the growth of “national security” notifications at the World Trade Organization (WTO), used to justify new trade barriers, has, as shown below, also soared since Trump’s first term. Although the U.S. pioneered regular use of the “national security” trump card, it has since spread widely, with countries as varied as Mexico and Switzerland playing it frequently. As the U.S. holds such notifications to be non-justiciable, the multilateral trading system has effectively been neutered by the practice.

The National Security Costs of Trump's Tariffs Are Growing

Jonathan E. Hillman
CFR senior fellow for geoeconomics

President Trump has been wielding tariffs to confront a range of national security threats: fentanyl, illegal immigration, the trade deficit, steel, aluminum, and other imports deemed threatening. But the national security costs of these tariffs are mounting, especially for the U.S. defense industry, critical infrastructure, and the country’s relationships with its partners and allies.

Tariffs make it more difficult to meet U.S. defense requirements in many of the same ways that they affect American households. Higher costs are passed to the customer, which in this case is the U.S. government. As a result, the Department of Defense simply can’t buy as much with its budget. Moreover, additional costs from tariffs are coming at a time when major weapon systems are becoming more difficult to deliver on time and without ballooning costs.

Tariffs also threaten U.S. critical infrastructure by driving up the cost of components. Most power generation technologies are expected to face cost increases of 6–11 percent, according to environment and energy consultancy Wood Mackenzie. The United States imports more than 80 percent of its large power transformers—mostly from Canada and Mexico—and contracts on these imports are often linked to the price of steel. If talks with China deteriorate, U.S. data center developers could be facing additional costs of more than $11 billion annually, according to Altana, a supply chain data company.

Finally, tariffs are also taking a toll on U.S. relations with partners and allies. Public majorities in twelve allied countries with U.S. treaties believe Trump’s economic policies will have a negative effect on their country’s relationship with the United States, according to a recent Ipsos poll. This shift in public sentiment encourages elected leaders to “derisk” from the United States. French President Emmanuel Macron has called for European “strategic autonomy,” and he is pushing for European replacements to U.S. cloud services, satellites, and fighter jets, among other areas.

It is still too early to fully measure the effects of tariffs on U.S. national security. Any benefits may well take longer to materialize, given that supply chains can take years to adjust. But in the meantime, mounting costs underscore the need for greater clarity of U.S. objectives, measurable targets, and exemptions to minimize unintended consequences.

Read Jonathan Hillman's longer assessment of the national security costs of Trump's tariffs by clicking here. 

Revenue Surge Likely to be Temporary

Matthew P. Goodman
CFR distinguished fellow and director of the Greenberg Center for Geoeconomic Studies

One of the benefits of tariffs touted by the Trump administration is that they will bring in substantial revenues to the U.S. Treasury. White House senior counselor for trade Peter Navarro has claimed that the tariffs will generate as much as $6 trillion in revenues over the next decade. President Donald Trump himself declared in April that the tariffs were bringing in “$2 billion a day” and later said that Americans earning under $200,000 a year would see their income taxes “substantially reduced, maybe even completely eliminated” as a result of the tariffs.

While independent economists are skeptical about these claims, Treasury Department data shows that tariff revenues are up substantially this year. As of July 1, roughly $97.3 billion in tariff revenues had come into the Treasury, up some 110 percent from the same period of 2024. In June alone, tariff revenues were $28 billion, a new record and more than four times the amount collected in the same month last year. The Urban-Brookings Tax Policy Center estimates that tariffs will generate a total of $189 billion in 2025 and nearly $360 billion in 2026.

However, there are several reasons to believe that this spurt in revenues will eventually peter out. Imports into the United States in the first few months of 2025 have surged as businesses seek to lock in supplies and prices ahead of the tariff increases; eventually, these businesses will reduce their purchases as the tariffs kick in and prices rise. This effect will be exacerbated by retaliatory tariffs imposed by trading partners, which will reduce U.S. exports and associated growth in the United States.

Revenues will also taper off, effectively by design, if two other Trump objectives are achieved. One stated goal of the tariffs is to encourage U.S. and foreign companies to produce more goods in the United States. If this works and imports fall as a result, tariff revenues will also decline. And if the Trump administration succeeds in striking deals with trading partners under which both sides agree to reduce tariffs, again, revenue to the U.S. Treasury will fall.

Finally, however much revenue is ultimately generated by the tariffs, it is worth remembering where those revenues will ultimately come from: the pocketbooks of American consumers. Businesses that initially cover the costs of tariffs will almost certainly pass them on to their customers.

The Panama Canal Concessions Came at a Cost

Will Freeman
CFR fellow for Latin America Studies

President Trump made Panama an early priority of his second administration, publicly mentioning the country and its canal fifteen times between December and May. He floated retaking direct control of the canal—which still handles 40 percent of all U.S. container traffic annually—while also demanding that Panamanian President José Raúl Mulino distance the country from China, which gained a foothold in port and telecommunications infrastructure after Panama City established diplomatic relations with Beijing in 2017. 

If the plan was to reduce Chinese presence in a country critical to U.S. trade, Trump’s strategy largely worked—with help from the Biden administration, which had more quietly pursued the same goal. Mulino agreed to exit the Belt and Road Initiative, audit the contracts on two canal-side ports leased to a Hong Kong company, allow for the return of U.S. military personnel to canal-side bases, and replace Huawei telecommunications towers. But Trump was pushing on a half-open door—perhaps unnecessarily aggressively—as Panama’s Mulino government already wanted to align itself more closely with the United States.

The question is whether Trump’s tough approach came at an acceptable cost. Mulino is now weak and unpopular—partly because he is seen as having done too little to stand up to Trump and defend Panamanian sovereignty. Months-long protests against his government have paralyzed parts of the country.

Panama is sliding into the type of ungovernability that—even more than Chinese influence—threatens the future of the canal and thus U.S. trade. Mulino must quickly build a new reservoir to ensure the canal continues to function in the face of climate change-induced droughts, but his unpopularity and the protests now stand in his way. Ironically, in addressing one problem—China’s growing presence—Trump exacerbated another: the Panamanians’ struggle to ensure the canal continues to operate smoothly.