The “America First” economic doctrine has undergone a full revival in 2025, creating what some are calling a bifurcated economy. Tariffs surged to an average rate of 22.5% in April, coming down to 18% in October after a myriad of trade deals were signed. The effects have been difficult to measure because of differing outcomes, chaotic foreign policy and the delayed impact of tariffs. The Yale Budget Lab has estimated that the overall price level has risen by 1.3% due to the tariffs, which is an increase in household costs by $1,800. Consumer prices on the other hand have seen an increase of about 17% YoY, causing the White House to withdraw quite a few of the tariffs on food amid inflation fears.

The price shock must either be absorbed by the exporter, importer or consumer. But as historical data has shown, it is always either the importer or consumer that absorbs the price increase. Consumer sentiment dropped to 50.30 this month, the lowest since June 2022. Economist Mohamed El-Erian stated that households are unable to absorb the price increases due to a lack of extra disposable income.

Domestic firms are increasingly realising, as they look at the price elasticities of demand of their goods, that they cannot pass through as much of the price increase as they want. This means that the profit of domestic firms will take a hit. Firms frontloaded imports before the April 5^th “Liberation Day” tariffs went into effect, causing trade deficits to widen instead of narrow, a priority that President Trump set out to achieve.

However, what is interesting to note is that despite trade-dependent businesses showing strain, a resilient tech and services industry have kept the economy afloat, with GDP initially decreasing by 0.6% in Q12025 and then increasing by 3.8% in Q22025. The stock market has been at all-time highs, driven by a strong tech sector and large AI-related capital expenditures. The job market has shown weakness, with the unemployment rate rising to 4.4% in September 2025. This has largely been attributed to AI related job losses. This will be a flashpoint to watch in the coming years, as the economy grapples with the trade-off between rising unemployment and AI-attributed efficiency and productivity increases.

The administration’s strategy of using tariffs as a tool to force countries into trade deals has been largely successful, with deals having been signed with countries like the United Kingdom, South Korea, Japan, Thailand, Vietnam and many others. The tariff increases have also been projected to raise $1.4tn from 2026-35, with FY2025 tariff revenues reported at $195bn, an increase of 153% compared to reported FY2024 collections.

Unfortunately, these policies have largely failed to achieve their main goal, of revitalising American manufacturing. However, this is again, difficult to measure well in the short term. Tariffs take time to fully flow through the economy, which is why economists have warned that the full impact of the tariffs has not been felt yet. The tariffs combined with a cautionary fed and large investment inflows has strengthened the dollar. While this would normally lower import prices for businesses and consumers, the tariffs have offset this reduction. A stronger dollar also makes U.S. exports less competitive, hitting sectors like agriculture and manufacturing.

Moreover, the chaotic nature of trade and foreign policy under the Trump administration has led to many businesses taking a “wait-and-see” approach, delaying capital investments until the policy path is clear and warning that higher costs and uncertainty undercut competitiveness internationally.

Dr. Torsten Slok, Chief Economist of Apollo Global Management (NYSE: APO) expects growth to reaccelerate in 2026, driven by the frenzy of trade deals signed by the new administration as well as positive effects attributed to the “One Big Beautiful Bill”, President Trump’s flagship tax cuts and deregulation bill.

The key word is “uncertainty”. It is difficult to ascertain whether these policies ultimately spark sustained growth or leave lasting scars until new factories come online, supply chains adjust and the tariffs fully ripple through the economy.

Looking for more? Take a look at these articles:

The World Reacts to Trump’s Tariffs

Weaponising Mourning: How Kirk’s Death was Used To Polarise The US

Where Did Kamala Harris Go Wrong?