Trump’s trade deals have been surprising in their one-sidedness, in favor of the United States. The president’s supporters have painted this in a positive light. But it likely reflects two things. First, Trump is willing to impose more economic harm through higher tariffs on the U.S. than our trading partners are willing to impose on their nations. Second, the European Union is willing to face higher tariffs in exchange for continued U.S. support for NATO — and Trump’s apparent lack of interest in the security alliance is not a good thing.

With decent economic growth in the first half of the year, many are asking whether economists overstated the harm of the trade war. Hardly. Remember that Trump has backed off significantly from the tariffs he promised to levy in April. So yes, there has been less damage than we expected after Trump’s “Liberation Day” announcement. But that is in part because markets panicked, so Trump scaled back the aggressiveness of his trade policies. In fact, the trade war is evident in the June consumer price data. And it will show up even more clearly in the July data.

The U.S. will likely avoid Joe Biden-level inflation and a recession. But avoiding those outcomes is a low bar for success. If Trump does not materially lower tariff rates, then the U.S. will experience higher unemployment, lower real incomes, slower economic growth, a less competitive manufacturing sector, fewer manufacturing workers and higher prices for imported goods.

The above commentary is an excerpt from a larger article on the effects of new tariffs announced on July 31. Click here to read the full article.