Trump’s across-the-board tariffs—10% on all imports, 25% on cars, 50% on metals—have pulled in $64 billion in Q2, a massive jump from $17 billion the year before. As reported by the Financial Times, customs revenue now makes up 14% of all US federal tax receipts. For comparison, that’s higher than capital gains tax. And it's climbing.
"Trump has made it clear that he is prepared to raise tariffs further in the face of retaliation," Marta Bengoa, professor of international economics at City University of New York, told The Financial Times. "Many countries learned from the 2018-2019 trade war that retaliation often leads to counter-retaliation rather than negotiated solutions."
This has given Trump a win he can hold up as proof that his strategy works. The reality is more complicated—but in the short term, it’s effective.
China and Canada blinked
Canada initially responded with its own tariffs and a digital tax. Then reversed course. Finance Minister Chrystia Freeland quietly dropped the tax and hasn’t added new levies.
China, the biggest target, retaliated early but has pulled back. Its own tariff income barely moved—up just 1.9% in May.
Their hesitation shows the leverage the US still holds in the global trading system.
Why most countries are holding fire
The short answer? They need the US more than the US needs them.
Mexico, the US’s top trading partner, chose not to retaliate at all. President Claudia Sheinbaum made it clear: negotiation first, confrontation last.
The EU talked tough. It even drew up a hit list of US goods—planes, whiskey, luxury cars. But nothing’s been imposed yet. Officials say they’re waiting for talks to play out before Trump’s August 1 deadline.
What this really means is: even the biggest economies don’t want to risk a trade war with the US right now. The US is still the largest buyer of goods globally. Most economies can’t afford to lose that demand.
“I’d like to think leaders were learning the lessons of history, but I fear that’s optimistic,” Alexander Klein, economic historian at the University of Sussex, told FT. “More likely, the EU, Canada and many other governments fear the hit to global supply linkages and inflation from escalation. Trump cares less about that, so is taking advantage.”
Inflation is creeping in
So far, inflation’s stayed under control. But that’s starting to change.
Prices for imported goods—furniture, clothes, electronics—are ticking up. UBS reported the fastest rise in core goods prices (excluding cars) in three years.
And while brands like Apple or Adidas can try to spread the cost globally, there’s a limit to how much they can shield US consumers. Some prices are just going up.
Economist Isabella Weber warns: “It could become self-reinforcing.” That’s economist-speak for: this might get out of hand.
Business confidence is shaky
US banks are still showing strong profits, but they’re also noting some cracks.
Citigroup’s Jane Fraser flagged a slowdown in business spending and hiring. Wells Fargo’s Charles Scharf echoed the same: firms are pausing. Not panicking, but not expanding either.
Fed officials are watching. New York Fed’s John Williams said the full effect of tariffs hasn’t hit yet—but it will.
Trump’s set an August 1 deadline. If countries don’t strike deals, he’s threatening to double down: 30% tariffs on nearly all imports.
That could finally provoke a coordinated response. EU trade chief Maroš Šefčovič says a move like that would make US-EU trade “almost impossible.”
For now, though, most countries are still in wait-and-see mode. Trump’s tariff blitz is delivering cash, giving him leverage. The rest of the world has weeks to decide whether to push back—or fold.
(with inputs from Reuters, Financial Times)
"Trump has made it clear that he is prepared to raise tariffs further in the face of retaliation," Marta Bengoa, professor of international economics at City University of New York, told The Financial Times. "Many countries learned from the 2018-2019 trade war that retaliation often leads to counter-retaliation rather than negotiated solutions."
This has given Trump a win he can hold up as proof that his strategy works. The reality is more complicated—but in the short term, it’s effective.
China and Canada blinked
Canada initially responded with its own tariffs and a digital tax. Then reversed course. Finance Minister Chrystia Freeland quietly dropped the tax and hasn’t added new levies.
China, the biggest target, retaliated early but has pulled back. Its own tariff income barely moved—up just 1.9% in May.
Their hesitation shows the leverage the US still holds in the global trading system.
Why most countries are holding fire
The short answer? They need the US more than the US needs them.
Mexico, the US’s top trading partner, chose not to retaliate at all. President Claudia Sheinbaum made it clear: negotiation first, confrontation last.
The EU talked tough. It even drew up a hit list of US goods—planes, whiskey, luxury cars. But nothing’s been imposed yet. Officials say they’re waiting for talks to play out before Trump’s August 1 deadline.
What this really means is: even the biggest economies don’t want to risk a trade war with the US right now. The US is still the largest buyer of goods globally. Most economies can’t afford to lose that demand.
“I’d like to think leaders were learning the lessons of history, but I fear that’s optimistic,” Alexander Klein, economic historian at the University of Sussex, told FT. “More likely, the EU, Canada and many other governments fear the hit to global supply linkages and inflation from escalation. Trump cares less about that, so is taking advantage.”
Inflation is creeping in
So far, inflation’s stayed under control. But that’s starting to change.
Prices for imported goods—furniture, clothes, electronics—are ticking up. UBS reported the fastest rise in core goods prices (excluding cars) in three years.
And while brands like Apple or Adidas can try to spread the cost globally, there’s a limit to how much they can shield US consumers. Some prices are just going up.
Economist Isabella Weber warns: “It could become self-reinforcing.” That’s economist-speak for: this might get out of hand.
Business confidence is shaky
US banks are still showing strong profits, but they’re also noting some cracks.
Citigroup’s Jane Fraser flagged a slowdown in business spending and hiring. Wells Fargo’s Charles Scharf echoed the same: firms are pausing. Not panicking, but not expanding either.
Fed officials are watching. New York Fed’s John Williams said the full effect of tariffs hasn’t hit yet—but it will.
Trump’s set an August 1 deadline. If countries don’t strike deals, he’s threatening to double down: 30% tariffs on nearly all imports.
That could finally provoke a coordinated response. EU trade chief Maroš Šefčovič says a move like that would make US-EU trade “almost impossible.”
For now, though, most countries are still in wait-and-see mode. Trump’s tariff blitz is delivering cash, giving him leverage. The rest of the world has weeks to decide whether to push back—or fold.
(with inputs from Reuters, Financial Times)
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