Donald Trump’s Tariff Announcement: A Closer Look
Anthony Scaramucci, a Wall Street stalwart, knows Donald Trump up close and personal. What stands out most to him is Trump’s “cruel” nature. Yet, as he repeats ad nauseam in his podcasts, Trump has incredibly sharp political instincts. According to Scaramucci, Trump always follows his gut – something instilled in him by his mentor, the ultra-aggressive New York lawyer Roy Cohn. And Scaramucci should know – he briefly served as White House Director of Communications under Trump.
Are Trump’s Tariffs the Right Move?
As the world grapples with the fallout from Trump’s April 2 announcement of sweeping reciprocal tariffs, one has to wonder: are Trump’s instincts right this time? Trump has dominated American politics for the better part of a decade, but these new tariffs fly in the face of economic, business, and political logic. It’s hard to see how they serve his political future.
Consider the context of Trump’s self-declared “Liberation Day”. Here’s what veteran Republican strategist Karl Rove wrote in The Wall Street Journal on April 3: “The problem for Republicans is that Mr. Trump was elected to stop inflation. A March 28 CBS News poll found that 64% of Americans already think Mr. Trump isn’t focused enough on ‘lowering prices’, while 55% say he’s focused too much on raising tariffs.”
Public Opinion Turning Against Trump
Rove added, “Most Americans believe Mr. Trump’s economic policies are either making them ‘financially worse off’ (42%) or ‘about the same’ (35%). Fifty two percent feel his policies are making food and groceries prices go up, only 22% say go down. Fifty-one percent think his policies are making the stock market fall, compared with 23% saying his policies are making it rise. Only 33% believe his ‘policies are making the US job market’ create jobs, while 48% say they are making it ‘lose jobs’…Americans are skittish about tariffs: 56% oppose them, with 72% believing they’ll raise prices in the short run compared to 5% who think they’ll reduce prices. Over the long term, only 29% say they’ll lower prices. They’ll certainly remember Mr. Trump saying he ‘couldn’t care less’ if US automakers raised prices because they had to pay more for imported parts.”
Estimates suggest that under Trump’s tariff regime, new car prices could rise anywhere from $2,500 to $20,000.
Impact on American Farmers
And then there’s the potential impact on American farmers—numerically small but among Trump’s most loyal voters. In the last election, Trump won nearly 78% of the vote in the 444 counties where farming dominates. As The Atlantic put it, “Tariffs will indeed hurt farmers badly. Farm costs will rise. Farm incomes will drop. Under Trump’s tariffs, farmers will pay more for fertilizer. They will pay more for farm equipment. They will pay more for the fuel to ship their products to market. When foreign countries retaliate, raising their own tariff barriers, American farmers will lose export markets. Their domestic sales will come under pressure too, because tariffs will shrink America disposable incomes: Consumers will have to cut back everywhere, including at the grocery store.”
Trump’s ‘America First’ Trade Policy
Trump has long believed that both allies and adversaries have exploited the post-World War II trade regime – where the US promoted global prosperity with low import tariffs while enduring higher tariffs on its exports – to enrich themselves at America’s expense. As two economists recently wrote in Foreign Affairs: “Trump possesses few consistent political ideologies but has promoted tariffs since the 1980s as a means to reduce trade deficits and spur US manufacturing, dismissing economists’ warnings that they would raise prices and potentially stagnate the U.S. economy.” ‘Make them pay for the privilege of selling to or being defended by the US’ – whether NATO, Japan, or South Korea – is a core Trump and MAGA tenet.
The ‘Trump Tariff Magic Potion’
Today, Trump sees tariffs as a cure-all for America’s economic woes. Short-term pain – what Trump calls “a little disturbance” – is a price he seems willing to pay to fulfill this vision. He argues that the tariffs will restore American manufacturing and generate “trillions and trillions of dollars” in government revenue, which could be used to lower taxes and pay down the national debt. According to his team’s projections, the announced tariffs would generate $6 trillion over a decade. Just the flat 10% tariff on all imports, they say, would alone create 2.8 million jobs by reshoring industries.
And there are signs, Trump’s team claims, that his “America First” trade policy is already yielding results – namely increased domestic investment and early signs of reshoring. According to the White House press site, some two dozen post-inauguration investment decisions have been made by U.S. and global giants across sectors including IT, AI, automobiles, and pharmaceuticals. These commitments total well over $1 trillion.
Challenges and Criticisms
But can you trust “The Trump Tariff Magic Potion” when it appears to ignore Economics 101? Can you, when it disregards the structural realities of both the US and global economies? Can you, when nearly a century of reduced tariffs – especially in the post-World War II era under GATT and later the WTO – has proven that a liberal trade regime is essential for embedding competitiveness and innovation, the twin engines of productivity, which is the surest path to long-term growth?
Economists argue that the US trade deficit is structural and inevitable: it stems from a low national savings rate paired with high consumption and investment. Foreign goods and capital are the economy’s lifeblood. Yes, the US imports more goods than it exports – but it exports far more services than it imports. More than 40% of US imports are components for domestic production. Tariffs on them simply raise production costs.
Globalisation has cost the US over five million manufacturing jobs, but thanks to its comparative advantage in tech-driven services, the US growth rate has consistently outperformed other Western economies. The US still generates about 25% of global GDP. Many American companies have invested hundreds of billions in global supply chains that cannot easily be unwound.
Is Trump Overestimating US Influence?
But this strategy appears to rest on an overestimation of US influence in global trade. While America dominates global finance and military spending, its share of global imports is around 15%. As the US weakens the rule-based WTO system, a complex and expanding web of bilateral and regional trade agreements is reshaping global commerce.
Warning Signs for Trump
Meanwhile, warning lights are flashing for Trump across key political and economic indicators. His approval rating has dropped, financial markets have reacted sharply, and there are signs of political shifts. Trump faces a major short-term political challenge with the tariffs likely to hurt key GOP constituencies.
Despite the challenges and criticisms, Trump remains steadfast in his belief that tariffs are the way forward for America’s economic future. Time will tell whether his instincts are right this time or if the fallout from these tariffs will reshape the political landscape in unforeseen ways.
