The Potential Economic Impact of Sustained, Significant Tariffs on Imports from China

A 10% tariff on all imports from China recently took effect, with a higher levy of 25% on steel and aluminum. China is an important US trading partner, with 2024 imports of more than $438.9 billion and exports of $143.5 billion. Top imports include various types of consumer electronics, computer equipment, machinery, and toys. In addition, US imports of iron and steel from China totaled almost $12.0 billion last year. Many of these products are integral to the US manufacturing supply chain as well as important to consumers. China is also the source of large proportions of specific products such as computers and related equipment.

The Perryman Group estimates that the cost to the US economy of a sustained 10% tariff on imports from China (with a 25% tariff on steel and aluminum) would include $58.1 billion in annual gross product and almost 460,000 jobs when multiplier effects are considered. In addition to the very large negative impacts on a variety of consumer-oriented segments such as retail trade and restaurants, US manufacturing sectors such as electronic equipment would be negatively affected. (See the accompanying table for results by industry.)

Clearly, imposing substantial tariffs on major trading partners is costly for all nations involved. In fact, China responded with a retaliatory tariff on more than $20 billion of US exports, which ultimately has the effect of making American products less competitive and, over time, likely decreasing export volumes. Higher tariffs increase prices, reduce, trade, and cause harms across affected economies.

For more details please refer to the full brief, available on our website as a PDF.