U.S. tariffs can't solve the problem of fiscal imbalance

Questioning AI · How does the internal economic structure of the United States lead to fiscal imbalance?

The picture shows a customer selecting vegetables at a supermarket in New York, USA. Xinhua News Agency reporter Liu Yanan photo

The International Monetary Fund (IMF) recently issued an assessment statement on the U.S. economy, predicting that the U.S. debt burden will continue to increase in the coming years, posing growing risks to both the U.S. and the global economy. The IMF urges the U.S. to adjust its economic policies, engage in constructive cooperation with trade partners, eliminate concerns over unfair trade practices, and reduce trade restrictions.

The IMF’s assessment indicates that the U.S. government hopes to solve its debt problems and reverse manufacturing difficulties by imposing tariffs, but this approach is unlikely to succeed and may backfire. Ultimately, the U.S. economic issues are complex and deep-rooted; raising tariffs cannot help resolve fiscal imbalance, industrial hollowing-out, and other economic maladies.

Following recent changes in U.S. tariff policies, especially after the U.S. Supreme Court ruled that the government’s use of the International Emergency Economic Powers Act to impose tariffs on multiple countries was illegal, the struggle between the judiciary and the executive branch has continued. Domestic debates in the U.S. over the legality and economic costs of tariffs persist. The uncertainty caused by U.S. tariff policies has become one of the biggest risks to its economy. The IMF points out that raising tariffs distorts the allocation of productive resources, disrupts global supply chains, and damages the benefits of global trade, while also increasing costs. The unpredictability of U.S. trade policy may cause greater-than-expected drag on economic activity. IMF Chief Kristalina Georgieva said that tariffs have negative supply effects for the U.S., exacerbate inflation, and hinder economic growth. In the long run, tariffs distort resource allocation and affect productivity. The U.S. should engage in constructive cooperation with trade partners to address mutual concerns.

The reality is that the U.S. tariffs have not truly been effective. On one hand, tariffs have not significantly reduced the U.S. trade deficit; the U.S. goods trade deficit is expected to continue expanding to a record $1.24 trillion by 2025. On the other hand, the hope that tariffs would revitalize American manufacturing has also been dashed; manufacturing employment in the U.S. has declined for eight consecutive months in 2025, and the uncertainty caused by tariffs has increased production costs, damaging the competitiveness of U.S. manufacturing. This also shows that raising tariffs cannot solve America’s fundamental problems; it not only harms U.S. interests but also severely damages the country’s reputation and endangers global economic development and supply chain stability.

The root cause of the U.S. economy’s problems lies internally, not externally; trade protectionism cannot change the structural characteristic of “low savings, high consumption” in the U.S. Nigel Chalk, head of the IMF’s Western Hemisphere Department, stated that the best way for the U.S. to reduce its current account deficit is to decrease its fiscal deficit. The U.S. government should find ways to increase household savings through more generous tax incentives, retirement plans, education savings rewards, and child education savings incentives.

Extensive research has confirmed that the costs of tariffs are mainly passed on domestically in the U.S., with importers, businesses, and consumers bearing most of the additional tariff costs. A study by the Federal Reserve Bank of New York shows that about 90% of the extra costs generated by U.S. tariffs in 2025 will be borne by American consumers and businesses. For the U.S. economy, tariffs are akin to prescribing the wrong “medicine,” with side effects that may far exceed short-term gains. The U.S. fiscal situation could face greater risks due to declining economic vitality. As Michael Strain, an economist at the American Enterprise Institute, said, U.S. tariffs are equivalent to “taking money out of Americans’ pockets, causing unemployment, increasing unemployment rates, and reducing U.S. companies’ competitiveness.”

The recent outbreak of conflict involving the U.S., Israel, and Iran has intensified U.S. fiscal pressure. Data released by the U.S. Treasury Department on March 18 shows that the total U.S. national debt has exceeded $39 trillion for the first time. Analysts expect that by this fall, U.S. debt will surpass $40 trillion. The main drivers of the rising U.S. debt in recent years include military spending, large-scale fiscal expenditures during the pandemic, and tax cuts. Kevin Hasset, director of the White House National Economic Council, said on March 15 that estimates show the U.S. has spent over $12 billion on military actions against Iran starting February 28.

In today’s deeply interconnected world, no one can win the future by building walls. The U.S. should face the IMF’s warnings squarely, reflect more on its own reasons, adjust its economic policies in a timely manner, and return to multilateral cooperation and rule-based development. This is not only a proper response to international concerns but also a pragmatic attitude toward the long-term development of the U.S. economy. Otherwise, no matter how many times tariffs are waved, the ultimate target will only be its own feet. (Source: Economic Daily, Author: Sun Yajun)