Economics, Macro & Global, World Trade

This research examines the economic and political implications of the 2025 U.S.–China tariff escalation under the Trump administration, referred to as “Liberation Day.” It explores how these tariffs—some of the most extensive protectionist measures in modern U.S. history—reshaped the structure of bilateral trade, business performance, and economic stability in both nations. By analyzing the effects on key indicators such as government revenue, debt, employment, and firm closures, the study assesses whether these measures fulfilled their intended goals of reviving U.S. industry and reducing dependence on Chinese manufacturing.

The paper employs an event study framework, tracking changes in trade, production, and employment before and after tariff announcements in 2025. It synthesizes multiple perspectives from prior research—Ruiming Min’s firm-level analysis of entrepreneurship, the Peterson Institute’s focus on consumer price effects, and Cornell University’s findings on trade flow adjustments—to develop a more holistic understanding of the trade war’s ripple effects. Drawing on official datasets from the U.S. Census Bureau, BLS, and China’s NBS, the study integrates macroeconomic and microeconomic data to show how tariffs functioned both as economic tools and political signals of sovereignty and industrial protection.

Findings suggest that while the tariffs temporarily boosted U.S. revenue and political legitimacy among manufacturing sectors, they also increased production costs, triggered Chinese retaliation, and disrupted global supply chains. Trade diversion through countries like Vietnam and India limited the effectiveness of U.S. protectionism, while retaliatory tariffs dampened U.S. export performance and business confidence. The paper concludes that the 2025 tariffs did not achieve lasting industrial revival but instead deepened economic interdependence under new, costlier forms. In doing so, it highlights the paradox of modern protectionism: even in an era of economic nationalism, global production remains too intertwined for unilateral tariff policies to secure genuine independence or sustainable growth.