Contributor: Trump’s tariff strategy is worse than a gamble. It’s a surefire loser
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At this writing, President Trump plans to impose sweeping new tariffs on imports from around the world. We’re told that “Liberation Day” tariffs will raise $6 trillion in federal revenue over the next decade, plus another trillion from automobile tariffs. But the only true “liberation” will be us Americans — consumers and taxpayers — being liberated from even more of our hard-earned income. So, hold on to your wallet.
If you don’t believe that Liberation Day is bad news for the overwhelming majority of us, first remember that U.S. consumers are, as always, the ones who pay U.S. tariffs. Whatever the Trump team collects from foreign imports will be shifted to us in the form of higher prices.
Then there is the fact that the administration is already preparing for economic damage control with emergency aid for U.S. farmers. The need for such aid is a tacit admission that the president’s trade policy — marketed as a tool to strengthen America — will trigger retaliations from our trading partners that will hurt many American producers, including farmers who export this country’s agricultural bounty to help feed the world.
And to paper over this destructive policy, the administration will blow another gaping hole in the federal budget with bailout money to compensate the victims.
How do I know? We’ve been here before.
During Trump’s first term, his trade war with China sparked retaliatory tariffs that cost American farmers an estimated $27 billion in lost agricultural exports. To cushion the blow on farmers, the administration spent $23 billion in bailout payments via the USDA’s Commodity Credit Corp. By one estimate, farmers received 92% of the tariffs on Chinese goods paid by us via higher prices at the supermarket.
Now the administration is gearing up for a rerun with even higher and broader tariffs, including on allies such as Canada, Europe, Mexico and Japan.
As it turns out, American agriculture is one of the most export-dependent sectors of the economy. When trading partners retaliate, they target farm products like soybeans, corn, wheat, cotton and pork. Why? Because it’s politically sensitive and economically effective.
Already, groups such as the National Corn Growers Assn. and the American Soybean Assn. are bracing for impact. As one member of the latter told the New York Times, farmers don’t want handouts but, rather, “access to a free and fair trade market.”
What they’re getting instead is uncertainty, falling commodity prices and the very real possibility of being shut out of long-cultivated markets as global buyers turn to Brazil, Argentina and the EU. Indeed, before the retaliating even starts, U.S. Secretary of Agriculture Brooke Rollins has assured farmers of USDA support while tariffs go into place. The rest of us won’t be that lucky.
The 2018–2020 tariffs raised consumer prices for goods such as washing machines, cars and electronics. According to economists at the Federal Reserve and several universities, American consumers bore nearly the full cost while protected domestic industries captured only modest benefits.
With a much broader set of tariffs now on the table, lower-income families who spend the largest shares of their income on goods — and who have been badly hurt from recent inflation — will likely suffer the most. That’s a dangerous proposition in an economy already wrestling with persistent cost-of-living pressures.
Here’s where things go from damaging to disastrous: If the administration follows through with both expensive new tariffs and more bailouts while simultaneously extending expiring tax cuts and adding new tax breaks without corresponding spending cuts, the result will be a fiscal black hole.
It’s true that Elon Musk and his Department of Government Efficiency are cutting spending and that the administration is rolling back many of the costly regulations inflicted by the Biden administration. It also wants to free the energy sector and generate more energy abundance. But it will take a long time to realize the benefits of these efforts, if they ever materialize. After all, many of these changes require congressional action, and Congress of late has been missing in action.
Trump’s tariff strategy is worse than a gamble; it’s a surefire loser. Experience proves that policies motivated by economic nationalism are all pain and no gain. The details of the long-run damage remain to be revealed. However, in the short term, we know for a fact that Liberation Day will hurt farmers, burden consumers and further bloat the budget deficit — all oh-so-misleadingly in the name of “America First.”
What America really needs are open markets, fiscal responsibility and stable trade relationships — not a rerun and enlargement of the last trade war.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate.