Donald Trump has done it again. The US President, known to be a proponent of tariffs, has threatened to impose levies on eight European allies—Denmark, Norway, Sweden, France, Germany, the United Kingdom,
the Netherlands and Finland—unless they support his plans to acquire Greenland.
Trump announced a 10 per cent tariff on imports from those countries starting February 1 this year, escalating to 25 per cent by June 1, and remaining in place “until such time as a deal is reached for the complete and total purchase of Greenland”.
The President has justified the drastic measure by calling Greenland “vital to US national security” and claiming that European activity around the Arctic territory poses risks.
A FAN OF TARIFFS
Trump argues that imposing tariffs helps the government collect more revenue, pushes consumers toward purchasing domestically manufactured products, and encourages companies to invest more within the United States.
He has framed the policy as a way to narrow the country’s trade deficit—the difference between what the US imports from other nations and what it exports to them.
The President has repeatedly claimed that unfair practices by other countries have disadvantaged the US economy, asserting that foreign competitors have taken advantage of American openness at the country’s expense.
ARE AMERICANS BEARING THE BRUNT?
While Trump may argue that the tariffs are a way to save the US consumer and economy, consumers have already begun to feel the pinch through higher prices on a range of goods, from toys, household appliances and furniture to some food items.
According to BBC, inflation in the United States reached 3 per cent in the year leading up to September, rising from 2.4 per cent in April. It later eased to 2.7 per cent in November and stayed at that level in December, coming in below the expectations of many economists.
Several major companies, including Target, Walmart and Adidas, have indicated that they plan to pass on the added costs of tariffs to American shoppers.
Prices are also expected to increase for products made in the US that rely on imported parts. The auto industry is a key example, where components often move back and forth across US, Mexican and Canadian borders multiple times before a car is fully assembled.
According to a new study from the Kiel Institute for World Economy, about 96 per cent of the tariff cost is passed on to US buyers—either businesses or households—and only ~4 per cent is absorbed by foreign sellers lowering their prices. This means tariffs act much like a tax on US consumption.
Even before 2026, analyses, for instance by Goldman Sachs, showed that US firms were absorbing a big share of tariff costs, with the share borne by US consumers rising over time as companies passed their higher import expenses on to retail prices.
This ultimately trickles down to the average American consumer.
Many US households are forced to pay more for imported goods (and for US-made products that use imported components) because tariffs raise input costs.
Various analyses have estimated that tariffs have effectively acted like a tax increase of roughly $1,100–$1,500 per household annually, with one US Congressional report putting the 2025 cost at about $1,200 per family.
TRUMP’S RATIONALE
Trump has consistently framed tariffs as a way to shrink the trade deficit, arguing that a large deficit means the US is “losing” to other countries, sending jobs and wealth abroad.
By imposing tariffs, foreign goods become more expensive, ideally encouraging Americans to buy domestic products and supporting US manufacturers.
He says tariffs also shield specific domestic industries from foreign competition. Examples include steel, aluminum, solar panels, washing machines, and certain electronics, noting that the goal is to prevent companies from relocating abroad and to revive domestic manufacturing jobs.
DATA SAYS OTHERWISE
Trump claimed tariffs would shrink the US trade deficit. However, in reality, the US trade deficit with China widened in many years of the trade war—from roughly $375 billion in 2017 to $419 billion in 2018—before falling slightly in 2019.
Tariffs alone cannot control overall imports and exports—they often shift trade to other countries rather than reducing total deficits.
His argument that tariffs would save or create American manufacturing jobs also seems to be fallacious. Data from the Bureau of Labor Statistics shows that while some industries (like steel and aluminum) had modest job gains, net job growth in manufacturing was minimal.
Many manufacturing sectors actually lost jobs, because tariffs raised costs for US companies that rely on imported inputs (for instance, auto parts, electronics).
Some US companies also relocated supply chains abroad or increased prices, rather than expanding domestic production.
Research from the Federal Reserve and IMF also indicates that tariffs weighed on GDP growth. According to an estimate quoted by The Independent, the trade war may have cost the US economy $40-$60 billion annually in lost output and slowed investment.
