Donald Trump has announced a radical new tariff policy that will likely shake up international trade, global supply chains. It is the biggest trade policy shift from the USA in over a century.

In this video, we break down:

✅ Trump’s 2025 tariff overhaul — with some countries facing rates as high as 54%

✅ The economic theory behind who really pays tariffs

✅ The effects on consumer surplus, inflation, and welfare loss

✅ Key microeconomics diagrams and real-world examples like Nike’s supply chain

✅ The concept of price elasticity of demand and how it matters for trade deficits

We’ll show you how to bring killer diagrams and top-grade analysis into your answers — whether you’re sitting A-Level, IB, GCSE, or any UK or international economics exam.

From Trump’s protectionist ambitions to the impact on US inflation, this is your go-to video to get clued up on one of the most topical issues in international economics.

📈 What’s in the Tariff Plan?

• A 25% flat tariff on all foreign-made automobiles
• 10% import tariffs on goods from a broad group of countries, including the UK, Brazil, and Australia
• Much higher tariffs on countries with large trade surpluses with the US:
  • China: 54%
  • Vietnam: 46%
  • Cambodia: 49%
  • EU: 20%
  • Canada & Mexico: 25% (already in place)

🎯 Main Objectives of the Policy:

1. Eliminate the US trade deficit (or get “back to zero”)
2. Raise billions in tax revenue to fund domestic tax cuts
3. Boost domestic employment by re-shoring manufacturing

However, achieving all three goals at once is economically unrealistic, especially given the potential for retaliatory trade measures and shifts in global demand.

💸 Who Pays for the Tariffs?

Despite the political spin, tariffs are paid by importers in the US — not foreign exporters. Ultimately, this leads to:

• Higher prices for consumers (reduced purchasing power)
• Potential cost-sharing between US importers and foreign suppliers
• Increased inflationary pressure, especially on price-inelastic goods

📉 Impact on Consumer Welfare:

The presentation includes clear supply and demand diagrams illustrating:

• Decrease in consumer surplus
• Deadweight welfare loss
• Fall in import volumes
• Government tariff revenue (area = tariff × quantity of imports)

🔥 Will Inflation Rise in the US?

Yes, especially in the short term:

• Cost-push inflation from higher import and input costs
• Possible wage-price spiral as workers respond to rising prices
• Disruptions in efficiency if firms have to shift supply chains

🌍 Global Supply Chain Disruption:

Major brands like Nike and Adidas, heavily reliant on countries like Vietnam, face a dilemma:

• Absorb higher costs
• Raise prices
• Or reconfigure production to lower-tariff nations

This policy may accelerate regionalisation of supply chains and force firms to adapt quickly.

📚 Key Concepts for Economics Students:

• Tariffs as a trade barrier
• Protectionism vs. Free Trade
• Price Elasticity of Demand (PED)
• Consumer & Producer Surplus
• Deadweight Loss
• Cost-Push Inflation
• Wage-Price Spiral
• Trade Deficits & Surpluses
• Globalisation & Supply Chain Economics

🧠 Why This Matters for Exams:

This is a case study goldmine for:

• AQA, Edexcel, OCR, Eduqas, IB & CIE Economics
• Micro and macro essays
• Diagrams, data interpretation, and evaluation
• Real-world examples to spice up analysis!

Stay tuned for more tutor2u updates — and don’t forget to use this case to strengthen your exam application skills. 🚀