Why Donald Trump’s tariffs are failing to break global trade

Six months on from ‘Liberation Day’, things look surprisingly rosy.

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On April 2, US President Donald Trump unveiled his “Liberation Day” tariffs, holding a board covered in figures showing just how unfairly the world treated America.

The numbers were nonsense, but the message was clear: The age of free trade was over.

Markets shuddered, America’s allies fumed and economists predicted catastrophe.

Dr Torsten Slok of Apollo, a private markets giant, put the odds of a tariff-driven recession in America at 90 per cent.

In parts of America’s economy, the pain is real. Prices of durable goods, a category that includes appliances and cars, rose by over 3 per cent at an annual rate in the second quarter of 2025, the fastest since the early 1990s (excluding the Covid-19 pandemic). The price of toys, most from China, is growing at nearly 5 per cent, a similarly unusual pace.

All told, estimates suggest that tariffs are adding around 0.3 percentage point to inflation.

Employment has weakened, too, in tariff-exposed sectors such as manufacturing and retail; bosses blame higher costs and uncertainty. Consumer sentiment in September was a fifth below its level a year ago.

Relative to a world without tariffs, America is worse off.

However, six months on, the full reckoning has not arrived.

There is no runaway inflation. America’s economy grew by 3.8 per cent at an annualised rate in the second quarter; the Atlanta Federal Reserve expects something similar in the third quarter.

Consumers are spending, firms investing and the stock market booming. The outlook has also improved elsewhere.

In September, the Organisation for Economic Cooperation and Development lifted its forecast for global growth to 3.2 per cent, up from 2.9 per cent three months earlier.

Why the good news?

One reason is that tariffs have been gentler than advertised. In April, America’s average rate was estimated to be near 30 per cent; today the same models put it closer to 18 per cent.