President Donald Trump is ready to put on the line the success of his second term, the economy and the personal finances of millions of Americans convinced that tariffs can recreate the golden age of American wealth and independence.
Or maybe not? Such is Trump’s unstable leadership that nothing is certain until it happens. And decisive orders, especially those on trade, are often reversed as soon as they are passed.
But Trump is promising that Wednesday, April 2, will be “Liberation Day” — a day when he will impose a dollar-for-dollar reciprocating tariff on countries that impose tariffs on American products.
His most drastic move yet to transform the global trading system could end up affecting every American, raising prices at a time when family budgets are already on edge.
However, the president is implicitly inviting everyone to embrace a strategy that promises tantalizing future benefits but requires sacrifice that will last for years.
Trump’s trade war policies have already wiped trillions of dollars from the stock market — the Dow Jones Industrial Average fell 700 points on Friday alone — and exacerbated fears of a recession as consumer confidence plummets.
He has also alienated America’s allies as his foreign policy begins to dismantle the Western alliance system.
As Wednesday approaches, the president is further eroding the confidence on which the economy depends by raising contradictory expectations — suggesting, for example, that some countries or industries could be exempt from new tariffs.
His leadership, which often changes direction, risks the same damage as the politics themselves.
Trump believes that imposing tariffs on imports will force companies to move production and supply chains to the United States, thereby creating jobs and reviving regions left impoverished by globalization.
However, the downside is that the tariffs will increase prices for consumers who are already exhausted by the high cost of living. Also, there’s no guarantee that companies will actually bring production back to the United States, as such a shift would take years and likely outlast Trump’s time in office.
If the president implements this policy, he will be taking a big political risk. But he seems unaware of the potential impact.
In shocking comments to NBC News on Saturday, the billionaire who heads the cabinet of billionaires and millionaires was indifferent to the car price hikes caused by his new industrial tariffs.
“I don’t care if they raise prices, because people will start buying American cars,” Trump said in a phone interview. “I don’t care, because if the prices of foreign cars go up, they will buy American cars.”
His stance risks a political backlash at a time when Republicans are already wary of the electoral impact of a sluggish economy and Trump’s policies, with a special congressional election in Florida this week threatening to embarrass the party.
Trump’s view also ignores the complexities of the 25 percent tariffs on cars that will take effect this week.
Manufacturing processes are deeply connected to factories in Mexico and Canada. This means that most US-made cars will become more expensive.
And while theoretically American cars could be immune from tariffs in the future, the higher production costs and investment required to set up production solely within the United States will be passed on to consumers.
In the coming years, the price of new cars will be many times higher, which will lead to a decrease in jobs in the industry.
Winners and losers
Trump’s belief in the almost mystical power of tariffs is rooted in his view of the world as a place of winners and losers, and his belief that the United States has long been cheated by European and Asian powers that protect their industries.
“We’re going to charge countries to do business in our country and take our jobs, take our wealth, take a lot of things that they’ve taken over the years,” Trump told reporters last week. “They have taken so much from our country, friends and foes.”
Tariff policy is as old as the United States itself. However, many economists blame restrictive trade policies for causing enormous hardship during the Great Depression of the 1930s, while the post-war period saw the gradual lowering of trade barriers and then a radical reshaping of global trade as the 21st century began.
the ramp refuses to accept the economic consensus that tariffs cause higher prices because importers pass the cost of additional taxes on to consumers. This is particularly worrisome because voters have not had much relief from rising prices of vital goods during the pandemic years. While inflation may have fallen, despite signs that it is rising again, the cost of living has not returned to the level it was five years ago.
The president’s goal to revive economic prospects in areas affected by the loss of factories is laudable. The economic transformation wrought by globalization has been painful, robbing communities of opportunity and contributing to an intoxicating epidemic. Administration officials argue that Trump’s policies will restore Main Streets scarred by rows of shuttered stores.
The sense of loss in the Rust Belt (the name for the areas of the northeastern and mid-Atlantic states of the US) plants forced Trump to rise politically, because he used the anger of ordinary Americans more effectively than other politicians of his generation.
There is no doubt that the promises of previous officials about the power of globalization to make every individual in America richer have not been fulfilled. Trump’s trade transformation drives those broken promises.
One of the arguments for expanding free trade and including China in the World Trade Organization was that it would liberalize the communist giant and make it less of a threat to the United States. But there was also an economic argument that it would make American jobs safer.
“For the first time, our companies will be able to sell and distribute products in China, made by workers here in America, without having to move production to China, sell through the Chinese government, or transfer valuable technology,” President Bill Clinton said in March 2000. “We will be able to export products without exporting jobs.”
This argument rings hollow to many Americans a quarter century later. And while it seemed logical to try to promote political reform in China through economic policy, Beijing has instead used trade concessions to finance its rise and consolidate its repressive domestic rule.
Idyllic production in the style of the 1950s
But is the president’s idealized view of the future American economy realistic?
Re-creating the idyll of American manufacturing in the 1950s is difficult to achieve in an era when the United States’ competitive advantages and economic power are focused on service industries, technology, and the rise of AI-based jobs and commerce.
While Canada’s other economies, for example, may lose out in a trade war with the more powerful United States, they may still cause major damage to American consumers.
Trump’s own unpredictability in extending deadlines, granting exemptions to tariffs, changing policy and then insisting on it again is also counterproductive, and not least because it has hit the market-based retirement savings of millions of Americans.
The pictorial depiction of a volatile politician attempting to personally manipulate the global economy to his hourly whims risks disaster. And it creates uncertainty that will discourage manufacturers from returning home.
There are also doubts about whether the president is on the long-term path and whether he will be willing to pay the political and economic price for reshaping the global economy.
Some signals suggest that it is.
“Access to cheap products is not the essence of the American dream,” Treasury Secretary Scott Bessant said at the Economic Club of New York this month.
“The American Dream is rooted in the concept that every citizen can achieve prosperity, advancement, and economic security. For too long, the designers of multilateral trade agreements have failed to see this reality. International economic relationships that are not working for the American people must be reexamined.”