US President Donald Trump on April 9 announced a 90-day pause on its “reciprocal” tariffs, citing that “more than 75 Countries” had reached out to the government for talks and have not retaliated meaningfully, but a recent analysis has suggested that the economic cost was too severe for him to ignore.
According to a report by The Conversation using a global economic model, the proposed tariff regime would have caused immediate and widespread damage to the US economy in employment, investment, growth, and real consumption.
The reports were published in The Conversation in two separate articles—one by Niven Winchester of Auckland University of Technology, and the other by James Giesecke and Robert Waschik of Victoria University.
The report outlined two scenarios: ‘pre-pause’ (before the 90-day suspension) and ‘post-pause’ (after suspending reciprocal tariffs).
The ‘pre-pause’ figures painted a grimmer picture
Real consumption was expected to drop by 2.4 per cent in 2025, with real GDP plunging 2.6 per cent, employment declining 2.7 per cent, and real investment nosediving to 6.6 per cent.
The study also suggested job losses, price hikes, and weakened household purchasing power.
The unemployment rate in the US is 4.2 per cent, so out of every 100 people in the workforce, about 4 are unemployed. The economic effects of the tariff plan would have caused about 2 more people to become unemployed, according to the analysis.
The long-term forecast, covering the 2025–2040, projected an average 1.2 per cent annual loss in real consumption, persistent investment weakness, and a continuing decline in GDP.
Post-pause
In the ‘post-pause’ scenario, both US and retaliatory tariffs are lower, resulting in reduced economic damage.
Under the ‘post-pause’ model, projections showed real US consumption declining by 1.9 percent in 2025, due to reduced employment and production inefficiencies.
Real investment would decrease by 4.8 percent, and employment would decline by 2.1 percent.
President Trump said the ‘Liberation Day’ would forever be remembered as the day American industry was reborn and a day America’s destiny was reclaimed.
The reciprocal tariffs should counterbalance what the administration describes as unfair foreign trade practices — including tariffs, currency manipulation, and non-tariff barriers faced by US exporters.
According to the report, the tit-for-tat trade war could shave $438.4 billion (1.45 per cent) off the US GDP — roughly $3,487 per household annually.
The report also said which country would be the biggest loser because of the reciprocal tariffs.
Mexico (2.24 per cent) and Canada (1.65 per cent) would suffer the steepest proportional GDP declines, given their export dependence on the US. Mexican households could see a $1,192 annual loss, while Canadian households may lose $2,467.
Vietnam and Switzerland would also experience notable declines in GDP — 0.99 per cent and 0.32 per cent.
Projections show that some nations with lower US tariffs, such as New Zealand (0.29 percent) and Brazil (0.28 percent), will benefit. New Zealand households could gain $397 annually.
Overall, the world would see a $62 billion drop in GDP, while global output would decline by $500 billion (0.43 per cent).
The most acute economic consequences have been postponed — for now. The next 90 days will be critical in determining whether the reprieve holds or if the world edges closer to deeper economic disruption.