How long will the tariff madness last?

After some months of uncertainty, during which the Trump administration has imposed, delayed and modified tariffs, the situation seems to have stabilised. Import taxes on goods from the European Union, for example, will be capped at 15% in most cases. The discussion now has turned away from whether the tariffs imposed by the United States can be avoided or minimised, and is rather about how long they will last.

The pessimistic view – which prevails among Bruegel scholars – foresees a life span of seven to 20 years. The optimistic, and minority, view is that it could be two to five years. Let us start with the pessimists’ arguments.

Pessimists argue that tariffs are bad economically but good politically. Even a Democrat president in the US is unlikely to revoke them. After all, President Joe Biden did not revoke the tariffs – admittedly much lower – imposed by President Trump during his first term. According to the pessimists, only a reform of the global trading system, based in the World Trade Organisation, could lead to lower tariffs. But this seems a distant prospect, with the US having very little incentive to enter into the necessary difficult negotiations now that all of its trade partners (or ‘enemies’ in the Trumpian Weltanschauung) have already conceded to Trump.

In addition, it is not obvious that a Democrat president will be elected after Trump: economic forecasts are difficult, political ones are impossible.

A third pessimistic argument, related to the political attractiveness of tariffs, is that they provide public revenue without the formal need to increase taxes. Economically, tariffs are taxes, falling mostly on consumers and firms in the country that imposes them. But they are not labelled that way and, at least according to Trump, they don’t require Congressional approval. This makes them attractive in the polarised US political environment.

A fourth argument is that the negative economic effects, in terms of inflation and growth, may be obvious and important to economists, but may be hard to grasp or irrelevant, compared with non-economic considerations, for the voting public.

Now the arguments of the optimists.

First, tariffs are economically stupid, bad for all those involved and particularly for the US. They will negatively affect US growth (a hit of some 0.5% in each of 2025 and 2026) and inflation, which would remain well above the Fed’s 2% objective. Simply put, tariffs increase the risk of stagflation.

Second, Trump’s tariff hike by a factor of about nine contrasts sharply with the secular trend towards freer trade and was clearly generated by one important but specific event: Trump’s re-election.

Third, the increased public revenue from tariffs should not be exaggerated. The US Treasury Secretary estimated it at $300 billion for the full current year, about $220 billion more than last year. Should tariffs drop back to pre-Trump levels, this amount, equal to 0.7% of US GDP, would need to be found elsewhere. This does not look an impossible amount to achieve.

Fourth, even if the general public is not particularly interested in economic statistics, people are likely to understand the damage from tariffs from their daily experience. In a democracy, as the US still is, the ability of a government to inflict pain on its electorate is limited.

Fifth, a Democrat president could find it politically clever to mark the difference with her or his predecessor by undoing tariffs, Trump’s signature policy.

I lean towards the optimistic side: Trump’s tariffs may be relatively short-lived, assuming that a democracy corrects mistakes once their negative consequences appear.

The author thanks Bruegel colleagues for discussions leading to this First Glance.