Tariff and its impact on the welfare of the United States of America

Protecting domestic producers of the import-competing goods, thus saving jobs in the sector is the key motive of tariff imposition though political pressure often leads to protectionism. Tariffs imposed by Trump administration which was effective from August 2025, (eventually struck down by US Supreme Court on February 2026) on imports of different countries aimed at revenue generation and import reduction for correcting unfavourable balance of payments. A higher rate of tariff though improves Terms of Trade of the tariff imposing country; it distorts trade by encouraging production in the inefficient import-competing sector and lowers consumption of tariff-imposed good thereby reducing the welfare of the tariff-imposing country.