Tariffs create 'a lot more economic pain than potential long-term benefits' - analyst (SP500:)

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  Published in Stocks and Investing on Saturday, February 21st 2026 at 20:35 GMT by Seeking Alpha
      Locales: UNITED STATES, CHINA

Sunday, February 22nd, 2026 - A recent in-depth analysis by Moody's Analytics continues to highlight a persistent, and often overlooked, drag on the U.S. economy: tariffs. Released initially in 2024, but with updated projections now reflecting nearly a decade of impact, the report estimates the cumulative cost of U.S. tariffs at a staggering $380 billion since 2018 - a significant increase from the $275 billion figure reported in 2026. The findings underscore a critical economic reality: tariffs, while often presented as tools for strategic negotiation or protection of domestic industries, frequently inflict more pain than they alleviate, hindering economic growth and disproportionately impacting American consumers and businesses.

Initially implemented under the previous administration with the stated goal of reshaping global trade relationships and bringing manufacturing back to the U.S., tariffs have demonstrably failed to deliver on these promises. While the intention may have been to incentivize domestic production and protect jobs, the unintended consequences have far outweighed any perceived benefits. The fundamental principle at play, as Moody's Analytics consistently points out, is simple: tariffs are taxes. These taxes aren't borne by the exporting countries as often assumed, but rather by those importing the goods - in this case, largely U.S. companies and, ultimately, U.S. consumers.

This cost manifests in multiple ways. Firstly, importers are forced to absorb the tariff costs, reducing their profit margins and potentially leading to reduced investment and hiring. More often, however, these costs are passed on to consumers in the form of higher prices for imported goods, contributing to inflationary pressures. Even domestically produced goods aren't immune, as tariffs on intermediate goods - components used in the manufacturing process - increase production costs for U.S. businesses, leading to price increases across the board. This ripple effect has been particularly pronounced in sectors reliant on global supply chains, like automotive, electronics, and retail.

The claim that tariffs are an effective tool for altering trade practices has also proven largely unsubstantiated. While they might induce short-term concessions during negotiations, the long-term effect is often retaliatory tariffs from other nations, escalating trade wars and creating further economic instability. The complex web of counter-tariffs disrupts established supply chains, introduces uncertainty for businesses, and ultimately damages international trade relations. The trade disputes of the early 2020s serve as a prime example, leading to protracted negotiations and little lasting positive impact on the U.S. trade deficit.

The current economic climate, marked by ongoing global uncertainties and a cautious approach to investment, makes the removal of tariffs even more crucial. Moody's Analytics now projects that eliminating existing tariffs could provide a significant boost to U.S. GDP - potentially exceeding 0.6% in the coming fiscal year. This increase wouldn't just be a statistical anomaly; it would translate to tangible benefits for American families and businesses through increased purchasing power, lower prices, and renewed economic activity.

However, dismantling the tariff structure isn't without its challenges. Political considerations, the desire to appear "tough on trade," and resistance from industries that have temporarily benefited from protectionist measures all complicate the issue. Furthermore, a sudden removal of tariffs could create short-term disruption as supply chains readjust. A phased approach, coupled with investment in domestic infrastructure and workforce training, could mitigate these risks and ensure a smoother transition to a more open and competitive trade environment.

The longer the U.S. maintains its current tariff policies, the greater the cumulative economic cost will be. The evidence is clear: tariffs are not a sustainable solution for fostering economic growth or protecting American interests. A shift towards free and fair trade, coupled with strategic investments in domestic competitiveness, is essential for unlocking the full potential of the U.S. economy and ensuring long-term prosperity. The report strongly suggests that policymakers reconsider this approach and prioritize policies that promote open trade and economic collaboration. Ignoring these findings risks further erosion of American economic strength and a continued drag on growth for years to come.