The world is walking on eggshells around President Donald Trump. The tariffs are coming.
Steven Center, executive vice president for Kia, voiced his concerns about Trump’s impending trade policy in an interview with the Wall Street Journal: “In two words: please don’t. Punch me in the arm. Smack me in the head. But please don’t put a tariff on.”
Trump’s threat of a universal 10% tariff on imports, 25% on goods from Canada and Mexico and 60% on Chinese goods would be like punching economies all around the world in the face. In an uncommon cross-class alignment, Wall Street elites, small business owners, foreign leaders and everyday consumers would all be reeling from a tariff hit and should be bracing themselves. These restrictions would send economies into a tailspin — tariffs of this magnitude can halt supply chains and fracture trade relationships.
The tariffs, which Trump promises to implement on Feb. 1, are justified by the President and the protectionist camp in his inner circle as a restoration of fair trade. Their idea is that the income supposedly generated from the tariffs could sustain Trump’s 2017 tax cuts for another 10 years, helping fill the multi-trillion-dollar gap in the government’s revenue. But if the President’s goal is to defend the working class, tax breaks should be the last thing on his mind.
In fact, many prominent economists, including some in Trump’s inner circle, predict a much different, and much more dangerous, tariff implementation outcome. Scott Bessent and Kevin Hassett, Trump’s picks to lead the National Economic Council, are both concerned that abrupt tariffs will spur inflation and cause stocks to fall. They would rather opt for a more cautious approach in which tariffs are implemented gradually and not uniformly.
In an article published on Inauguration Day, The Morning Star predicted that a uniform tariff of 10% and a 60% tariff on imports from China would cause a 1.9% decrease in GDP. Moody’s, a financial services company, predicted that the same 10% and 60% tariff would cause a 0.4% increase in unemployment, which is a loss of 675,000 jobs. Moody’s chief economist Mark Zandi claimed, “If Trump increases tariffs as he has proposed, the economy would likely suffer a recession soon thereafter.” According to an analysis by the Peterson Institute for International Economics, the combination of increased unemployment and raised inflation rates will cause a decrease in consumer spending, further stunting economic growth.
American consumers will likely see inflated grocery, electronics and clothing costs. All three industries rely heavily on foreign imports, and an increase in tariffs will translate to increased prices.
However, foreign economies, specifically those of Canada and Mexico, would suffer even greater trade withdrawals. Both countries are significantly more dependent on trade with the U.S. than the U.S. is on trade with them. Canada and the U.S. have a $800-billion-a-year trade relationship. Without this revenue, Canada’s GDP could decline more than 2.4% over two years and the country could lose 1.5 million jobs. Similarly, Mexico, who sends 80% of its total exports to the U.S., could suffer a 2% decline in GDP as well as mass job losses and factory closures.
I have one thing to say to summarize this data: Workers and consumers will suffer the most from Trump’s tariffs.
Projected apathy towards our neighbors does not imply internal, widespread prosperity. A global trade war and consequent “tariff-cession” will not protect the U.S. as much as it will compromise our foreign relations. Trump’s tariffs not only threaten free trade, but could also mark the beginning of the end of a globalized economy which is already being heavily criticized by the Left and the Right. Republicans, including Trump, have blamed globalization for creating a new class of international elites that profit from open borders and thereby erode nationalist solidarity. But their anti-globalization rhetoric has turned into an excuse for hardline nationalism, wrongly promoting isolationism as the solution to globalization’s problems. Although tariffs will dissuade countries from exchanging goods with the U.S., it will not hinder the free flow of capital which corporations use to cut labor and production costs.
Mexico and Canada have threatened retaliatory action against Trump’s tariffs, indicating the start of a messy trade war. Justin Trudeau, Canada’s prime minister, targeted red states, warning to implement retaliatory tariffs on orange juice from Florida, whiskey from Tennessee and peanut butter from Kentucky. The president of Mexico, Claudia Sheinbaum Pardo, also said she will fight back against the U.S. with tariffs.
A world in which the U.S. makes enemies of neighboring countries while global elites cozy up to one another is a scary, dangerous and fast-approaching reality. Tariffs won’t stop it.
