US economic growth slows amid rising trade barriers

This photo taken on March 29, 2023 shows the White House in Washington, D.C., the United States. [Photo/Xinhua]

The Organization for Economic Cooperation and Development (OECD) released its latest Economic Outlook on June 3, projects global GDP growth to decelerate from 3.3% in 2024 to 2.9% for both this year and the next. The United States economy is expected to see a significant slowdown, with growth dropping to 1.6% in 2025 and 1.5% in 2026. So, what's behind this slowdown? Let's take a closer look at the role of trade barriers.

First, let's get a handle on the current state of trade barriers. In recent years, the U.S. has been at the forefront of implementing a series of protectionist trade measures. These include imposing tariffs and erecting various trade barriers. For example, on May 23, U.S. President Donald Trump proposed directly imposing a 50% tariff on EU products starting from June 1. Products manufactured or produced in the U.S. would be exempt from this tariff. However, according to the latest news, after a phone call between President Trump and EU Commission President Ursula von der Leyen, it was decided to postpone the implementation of the 50% tariff on EU products until July 9. While the intention might have been to shield domestic industries and jobs, the reality has turned out to be quite different.

Trade barriers have had a profound impact on U.S. exports. As a major export-oriented economy, the U.S. relies heavily on international markets for many of its industries. However, these barriers have diminished the competitiveness of U.S. products abroad. In retaliation for U.S. protectionist moves, other countries have also raised tariffs on U.S. goods. This has left U.S. exporters grappling with higher costs and shrinking market shares. Take U.S. agricultural exports, for example. Due to retaliatory tariffs from other nations, U.S. agricultural products have found it increasingly difficult to penetrate international markets. In 2024, the export value of U.S. soybeans was $24.5 billion, lower than the $27.7 billion in 2023 and the record high of $34.4 billion in 2022. This has led to a drop in domestic agricultural prices and a decline in farmers' incomes.

Trade barriers have also wreaked havoc on supply chains. In today's globalized world, many U.S. industries depend on intricate global supply chains. These barriers have caused these supply chains to fracture and reconfigure. Numerous companies have had to scramble to find new suppliers, incurring additional costs and experiencing reduced production efficiency. For instance, U.S. manufacturing firms often rely on imported components. Trade barriers have disrupted the supply of these parts, forcing companies to spend more time and money seeking alternatives. This not only affects production but also drives up product prices. The manufacturing PMI for May shows that the prices index was as high as 69.4%. Although it slightly decreased compared to last month, it still remained at a high level, indicating that raw material costs have been rising for eight consecutive months.

Trade barriers have led to a decline in business investment. Amid the uncertainty of the trade environment, many companies have become wary of future market prospects. They fear that escalating trade barriers could further erode their profits. As a result, they have cut back on investments in new projects and equipment. This not only hampers long-term corporate development but also has a negative impact on economic growth. For example, some U.S. tech companies had planned to expand production, but they have had to either delay or shelve these plans due to the impact of trade barriers. Green energy projects have also been suspended to varying degrees, with major clean energy projects not being spared. Flagship projects that have been put on hold include the $1 billion solar panel factory in Oklahoma by Italy's Enel Green Power, the $2.3 billion battery storage facility in Arizona by South Korea's LG Energy Solution, and the $1.3 billion lithium refinery in South Carolina by the world's largest lithium miner, U.S.-based Albemarle.

Lastly, trade barriers have eroded consumer confidence. Consumers are a vital part of the economy, and their spending behavior directly affects economic growth. Trade barriers have caused product prices to rise, increasing the cost of living for consumers. For example, in April 2025, the U.S. CPI increased by 3.4% year on year. At the same time, trade barriers have led to job losses, with unemployment in the U.S.at 4.2% in April, heightening consumers' concerns about the economic outlook. This has led consumers to cut back on spending, which in turn has had a negative impact on economic growth.

So, what does the future hold for the U.S. economy in the face of these trade barriers? In the short term, the U.S. economy is likely to continue facing the pressure of slower growth. The impact of trade barriers won't vanish overnight, and companies will need time to adapt to the new trade landscape. In the long run, the U.S. will need to reassess its trade policies and seek more open and cooperative trade relations. Only by strengthening international cooperation and reducing trade barriers can sustainable economic growth be achieved.

In summary, trade barriers are a key factor in the projected U.S. economy slowdown. They have affected U.S. exports, disrupted supply chains, reduced business investment and eroded consumer confidence. The U.S. must take proactive measures to address these challenges. 

The author is an associate professor in economics at Beijing International Studies University.