Donald Trump’s 2025 return has triggered the most significant protectionist surge since the 1930s, with US effective tariffs reaching 18. 2% by August. This paper synthesises economic theory and empirical evidence on the tariffs’ welfare effects, analyses current US trade measures, and quantifies their impacts using a structural gravity model. Drawing on trade data and structural gravity simulations, the analysis quantifies both the immediate and long-term effects of these measures. Results show that US exports contract by 31% and welfare declines by 1. 4%, equivalent to 400 billion annually, while full retaliation would raise global welfare losses to 1. 4 trillion. The UK faces mixed outcomes: minor gains from trade diversion are outweighed by losses in goods sectors integrated into transatlantic supply chains. The findings underscore that contemporary protectionism, much like the Smoot–Hawley era, delivers short-term political gains at the expense of systemic stability. The paper concludes with policy recommendations for the UK, the US, and for multilateral institutions to mitigate escalating fragmentation and restore confidence in rules-based trade.
Du et al. (2026) studied this question.