Trump’s tariffs build $1 trillion trade wall around U.S. economy

Trade experts tell CNBC that the tariffs announced by President Donald Trump on Wednesday are equivalent to building a trade wall around the U.S. economy of nearly $1 trillion.

With the way tariffs work, the estimated costs of the new tariffs U.S. businesses will be paying is $654 billion a year, according to Trade Partnership Worldwide, and it’s a number that will grow — the figure does not include up to $300 billion more in new tariffs under the International Emergency Economic Powers Act (IEPPA) and Section 232 of the Trade Expansion Act tariffs on steel, aluminum and autos.

American companies will now be on the hook for $1 billion to $2 billion per day, based on estimates using tariff costs paid in 2024. 

The U.S. stock market, which saw its worst daily loss since 2020 on Thursday, originally anticipated reciprocal tariffs tied directly to tariff rates on U.S. goods in other nations, but instead the Trump administration devised a formula based on trade deficits which has left many economists confounded and investors surprised by the overall level of tariffs that resulted from the approach.

“If this holds up in court, then we are waking up to a new global economy with a different set of costs than we have known for the last several decades,” said Josh Teitelbaum, senior counsel at the law firm Akin and a former Deputy Assistant Secretary of Commerce during the Obama administration. “Every sector — clothes, shoes, groceries, manufacturing will be touched. It is hard to overstate the impact,” he said.

Beyond Apple, tech sector trade surplus will be a target

The market’s biggest and long-time best-performing sector is among the casualties, but the potential damage extends far beyond Apple, which is seen as acutely exposed given its Asian-based manufacturing, and suffered its worst stock drop since Covid on Thursday. According to Cesar Hidalgo, a professor at the Toulouse School of Economics, technology, is a good example of the limitations of the new approach to settling trade scores. Tech giants, now at risk of being targeted by trading partners for tariff retaliation, have been running a big trade surplus with the rest of the world — a $705 billion surplus — as opposed to a deficit.

Topping the list is Alphabet, which exported $141 billion in services, followed by:

In 2024, the United States exported about $2 trillion in physical goods and imported about $3.27 trillion. At face value, that would translate into a trade deficit of about $1 trillion. But for some time now, the U.S. has been exporting through routers: every time a foreigner streams a movie on Netflix or buys an ad on Facebook, the U.S. is exporting.

“We estimate that the U.S. enjoys a trade surplus of at least $600 billion in digital products,” said Hidalgo. “This is comparable to the total exports of France, which is the seventh-largest exporter in the world,” he added.

U.S. exports in digital advertising & cloud computing alone represent about $260 billion and $184 billion, respectively, according to his data. “Which is larger than the exports of the U.S. in crude or refined petroleum, the biggest export products of the U.S.,” Hidalgo said. “It’s reasonable for world leaders to look at U.S. tech for retaliation. If you are in a war with Russia, you target gas and oil. If you are trying to push around Germany, your target is cars. In the case of the U.S., the big export sector is the web,” he said.

Tech services won’t be the only target of trading partners, according to Jason Miller, assistant professor of logistics in the department of supply chain management at Michigan State University’s Eli Broad College. He expects massive foreign retaliation aimed at U.S. aerospace, machinery, food, beverage, primary metals, electrical equipment, computers & electronic products, energy, and especially, agriculture, and says that other nations have leverage in the fact that it’s been decades since the U.S. has had the ability to produce many of the products that other nations supply.

On a collective tariff basis, the hardest hit states in the U.S. will be its biggest economies one of the reddest and bluest states. Texas will see a 9.5-fold jump in tariffs paid by businesses, increasing from a 2024 level of $7.2 billion to new potential costs of $66 billion. California, will see an eight-fold increase in tariffs paid by businesses, from $17 billion last year to potential costs as high as $139 billion.

“The magnitude of these tariffs, their global coverage, and the fact they affect many types of goods for which the U.S. has limited domestic manufacturing capacity, means they will inevitably cause inflation,” said Miller.

Not just Nike: U.S. lacks manufacturing capacity in key sectors

Nike was among the market’s worst-hit stocks on Thursday, with massive manufacturing operations tied to China and Vietnam, and Miller says apparel and footwear is a good example of where pain will be felt as a result of a lack of manufacturing capacity in the U.S.

The Commerce Department’s Bureau of Economic Analysis estimates that roughly 90% of U.S. consumption for these goods comes from imports, and the U.S. today has only one-eighth to one-tenth of the capacity to make apparel compared to 30 years ago. “Switching to domestic substitutes isn’t feasible, and wouldn’t be so for many years,” Miller said.

The White House has signaled that it isn’t interested in quick negotiations with trading partners, and while many market watchers were skeptical of that as stocks tanked, Eurasia Group wrote in a note to clients, “These rates are intended to be a durable ‘tariff wall’ around the United States, and as such are not likely to be easily negotiated away, though individual nation rates may be adjusted downward based on ongoing negotiations or potential future concessions or conversely escalated depending upon the level of tariff retaliation.”

The White House sent mixed signals on Thursday. Top Trump trade advisor Peter Navarro told CNBC the tariffs are “not a negotiation.”

Then, later in the day Reuters quoted the president himself as saying on Air Force One that he would be open to tariff talks with other counties if they offer something phenomenal.

Shipping giant Maersk: ‘Clearly isn’t good news for global economy.’

As trade negotiations are pursued, supply chain costs will rise for importers and consumers.

BIMCO’s chief shipping analyst Niels Rasmussen wrote to clients on Thursday that the vow to retaliate by key U.S. trading partners, such as China, South Korea, Japan, and the European Union will increase the cost of global trade and the U.S. market foot the biggest part of the bill.

“U.S. businesses appear likely to suffer more than businesses and consumers in the countries that may retaliate. … In the U.S., the tariffs are likely to lead to increased inflation and lower economic growth. Considering the importance of the U.S. economy, this could in turn slow down global economic growth,” Rasmussen wrote.

The fear of retaliation led to months of trade frontloading by many U.S. companies, with BEA data tracking imports for January and February showing a dramatic pulling forward of freight, from cell phones to finished metal goods and pharmaceuticals where there were soaring volumes. That has continued in recent days and the supply chain disruptions will grow.

“In recent days, we’ve seen shippers react in real-time, some rushing to move goods before costs rise, others pausing to reassess their strategies. But the broader impact could be more disruptive,” Uber Freight CEO Lior Ron wrote in an email to CNBC. “These policies affect global trade networks. Shippers who rely on imports from regions like the EU, India, Thailand, and Taiwan now face new financial and logistical challenges.”

Uber Freight is working closely with customers, he said, to “quickly adjust freight strategies to stay ahead of disruptions and keep goods moving.”

The broader impact could be more disruptive, according to Uber Freight’s senior economist Mazen Danaf. The latest data already shows contraction, with declining orders and production, while inflationary pressures continue to mount. “Higher tariffs on imported goods — ranging from cars to raw materials — threaten to slow manufacturing, cut jobs, and drive up costs at a time when supply chains are still stabilizing,” Danaf said.

Shipping giant Maersk, the second largest ocean carrier in the world, said in a statement emailed to CNBC that the tariff plan is significant, and in its current form, “it clearly isn’t good news for [the] global economy, stability, and trade.”

In the “very” short term, Maersk expects to see some rush airfreight orders in the U.S. ahead of the announced tariffs going into effect. But it generally expects customers to be “a bit more cautious about their inventory levels.”

“It is still too early to say with any confidence how this will ultimately unfold. We need to see how countries will respond to these plans — and to what extent they choose to negotiate, impose counter-tariffs, adjust import duties, or pursue a combination of these measures,” Maersk wrote. It said customers “will need the ability to speed up or slow down goods and potentially redirect flows to alternative markets to keep their goods moving efficiently. We will closely monitor customer reactions and be ready to adapt accordingly.”

Critical sector CEOs such as medical are headed to Capitol Hill

Top CEOs in the market are reportedly not happy with the tariff plans, and business leaders are already planning their trips to Washington, D.C., to make their case directly to lawmakers. Medical device company CEO Casey Hite of Asheville, North Carolina-based Aeroflow Health is headed to the Hill next week to speak with his congressman and senator.

Aeroflow Health services over 1.5 million patients annually through health insurance, with medical devices ranging from breast pumps (half are manufactured in China) to CPAP and BPAP machines, sleep apnea and severe sleep apnea devices, and diabetic equipment, such as glucose monitors. The company gets paid by insurers at pre-negotiated rates. 

The company is busy calculating the impact of the tariffs and prices could increase anywhere between 7%-12%.

Hite explained that most insurance contracts are evergreen from a pricing standpoint, where manufacturer contracts are renewed on an annual basis. Depending on the product, the adjusting of tariffs because of these schedules can take months or even years, and patients will see the result of that market dynamic through limited choice and overall availability of products. “Businesses like Aeroflow Health are forced to find lower-cost products or accept significantly lower margins. This situation negatively affects both healthcare consumers and businesses,” he said.

With patients on Medicare, which have fixed fee schedules, the passing of the tariff cost directly to the consumer isn’t feasible. “We are unable to pass those costs over to the patients,” Hite said.

The lower volume products, like lymphedema pumps to treat the symptoms like swelling from a condition estimated to affect as many as 10 million Americans, could see high pricing more quickly than others.

“Products like this have only one or two overseas manufacturers and if margins are already slim, that tariff trickle-down effect would be seen sooner,” Hite said. “The quality of medical care needs to be taken into consideration.”

What a Cadillac Escalade reveals about supply chain cost challenges

The complexity of supply chains and the multitude of components in a single product add numerous layers of cost. Supply-chain consultant Exiger used the 2025 Cadillac Escalade OLED infotainment system as an example.

The OLED display panels are produced by LG in South Korea, while the specialty curved cover glass is formed in Japan, and the touch-sensitive film sensors and semiconductor driver electronics are made by companies LX Semicon and MagnaChip, based in South Korea. Meanwhile, the connectors and wiring harnesses are made by TE Connectivity, with some assembled or partially integrated in Mexico.

“The challenge is tracing each of these carefully manufactured components across multiple borders, through various stages of assembly and integration, to clearly understand where exemptions exist and where tariffs might bite,” said Brandon Daniels, Exiger CEO.

“Every time a product crosses a border, it adds layers of complexity — costs, paperwork, and potential delays,” said Ronald Kleijwegt, CEO at Vinturas, a global supply chain collaboration network, serving global manufacturers and OEMs, like Mitsubishi, and The Association of European Vehicle Logistics. “Many supply chains today are built for efficiency, but new tariffs are forcing companies to rethink their strategies. This could mean adjusting trade routes, shifting sourcing, or even relocating production to manage costs and minimize disruptions.”

And it likely means more cost of doing business for many.

“Smaller importers may face higher brokerage costs because of their inability to navigate all the different tariffs,” said Andre C. Winters, founder and principal of supply chain consultancy and planning company, HudsonWinters. “This new trade war is more than tariffs. It’s the rising costs from sourcing, manufacturing, to the logistics costs. There will be a need for individuals that see the big picture, not just experts in one piece of the supply chain to quantify the costs.”

Winters is among those doubtful that companies will bring manufacturing back to the U.S. in a hurry.

“This trade war is not an incentive to come back to the United States,” said Winters. “Companies will look to other countries that are being hit with lower tariffs. If I’m paying 40% in Vietnam and I can get 20% tariff in another country, I’ll go there, because in the end, it is still cheaper than coming back to America.”