by Daniel Brouse
April 9, 2025
The Peterson Institute for International Economics (PIIE) calculated that the cumulative average tariff rate on Chinese imports would reach nearly 125% following the implementation of an additional 84% tariff by the Trump administration. This calculation accounts for the compounding effect of successive tariff increases over time.
Here’s a breakdown of how this figure is derived:
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Initial Average Tariff Rate: Before the recent tariff announcement, the average tariff rate on Chinese imports was approximately 20.8%. This figure includes tariffs imposed during President Trump’s first term and subsequent adjustments under President Biden.
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Additional Tariff Imposed: An additional 84% tariff is set to be applied to Chinese imports.
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Compounded Tariff Calculation: The new tariff is applied on top of the existing tariffs, leading to a compounded effect. The formula to calculate the cumulative tariff rate is
Total Tariff Rate = (1 + Existing Tariff Rate) * (1 + Additional Tariff Rate) – 1
Total Tariff Rate = (1 + 0.208) * (1 + 0.84) – 1
Total Tariff Rate = 1.208 * 1.84 – 1
Total Tariff Rate = 2.22472 – 1
Total Tariff Rate = 1.22472 or 122.472%
Rounding this figure gives approximately 122.5%, which aligns with PIIE’s calculation of nearly 125%.
This compounding effect illustrates how successive tariff increases can significantly elevate the overall tariff rate, leading to substantial impacts on trade dynamics and economic relations between the involved countries.
The new wave of tariffs on Chinese imports isn’t just economically misguided — it’s economically self-destructive. Far from punishing China, these tariffs act as a massive tax on American consumers and businesses. Tariffs are paid by U.S. importers, not by China. The costs inevitably flow downstream, driving up prices on everything from electronics and cars to construction materials, clothing, and medical equipment. In other words, tariffs are inflation accelerators — hitting American families directly at a time when inflation is already a concern.
Worse, these policies cripple the very U.S. manufacturers they claim to protect. American factories depend heavily on Chinese parts and materials to remain globally competitive. By driving up input costs, tariffs make U.S. manufacturing less competitive, not more. The likely result is fewer U.S. factory jobs, higher consumer prices, and a growing incentive for companies to offshore even more production.
China will not sit idly by, either. Retaliatory tariffs targeting U.S. exports — especially agricultural products like soybeans, pork, and corn — are almost guaranteed. U.S. farmers, already vulnerable in a highly competitive global market, will feel the squeeze first. Exporters of aircraft, cars, and technology are next in line.
Over time, this kind of trade policy encourages global supply chains to bypass the United States altogether. Multinational companies hate uncertainty and will naturally redirect investment to more stable environments like Mexico, Vietnam, or Indonesia. This risks isolating the U.S. economy from global trade flows and eroding its long-standing central role in the global economy.
Economically, the U.S. faces a toxic mix: rising prices alongside slowing growth — the classic recipe for stagflation. Inflation accelerates because of higher import costs, while growth slows as manufacturing, exports, and consumer demand contract under the weight of higher prices. Rising unemployment in key sectors becomes a real risk.
Perhaps most ironically, this tariff policy undermines America’s own technological leadership. Many U.S. innovations, from iPhones to solar panels, rely on Chinese components. Disrupting these supply chains increases costs for R&D, slows the adoption of green technologies, and handicaps U.S. efforts to lead the world in the next generation of tech.
Strategically, it’s even worse. The more the U.S. behaves like an unreliable or hostile trading partner, the more it pushes other countries — including allies — toward China’s orbit. China gains a propaganda victory, portraying itself as the stable alternative to an erratic and isolationist America.
Ultimately, these tariffs function less like economic policy and more like economic self-sabotage. They tax Americans, hurt U.S. businesses, fuel inflation, slow growth, threaten jobs, and weaken America’s position in the world. It’s like burning down your own house because you don’t like the neighbor’s paint color.
White House Tariff Clarification — The Executive Order outlines that the total tariffs on China under Trump 2.0 amount to 145%, on top of approximately 20% imposed during Trump 1.0, resulting in an effective tariff rate of around 165%. However, most economists agree that tariffs exceeding 50% function effectively as a trade embargo, severely limiting or eliminating imports altogether.
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