President Trump says he loves tariffs, but that love isn’t shared by Main Street or Wall Street. The Trump Administration’s on-again-off again tariffs are whipsawing American companies, distracting executives, collapsing confidence, and stunting economic growth. On Wednesday, the U.S. Federal Reserve predicted an uptick in core inflation, tied to “uncertainty around the economic outlook.”
The Fed’s language may be polite, but these tariffs are taxes on American businesses and consumers, inciting inflation when Americans can least afford it. We need lower interest rates to bring down prices for everything from laptops to laundry detergent, reduce interest payments on our out-of-control national debt, and entice the investment and construction needed for future innovation and growth.
It’s not just about imports. The Trump tariffs reverse decades of U.S. policy and carefully negotiated treaties that help American businesses sell their goods and services globally. The 1996 NAFTA and 2019 USMCA, negotiated during President Trump’s first term, gave American companies the certainty they needed to invest in Canada and Mexico. That helped companies, which could calibrate supply chains, assembly, and manufacturing. It also supported millions of American jobs.
Now, industries like America’s automakers and electronics manufacturers are in jeopardy. On April 2nd, short-term exemptions for USMCA-covered products will expire and 25% tariffs on Canada and Mexico will go into effect. These add to already existing tariffs on steel and aluminum, as well as threatened ‘reciprocal’ tariffs. While those tariffs may prop up domestic industries and create some American jobs, they’re likely to destroy far more as soaring tariffs force American businesses to cut costs, raise prices, or show losses.
They may also be counterproductive. Tariffs have already forced multiple pivots from American companies. When the Trump administration first imposed tariffs on Chinese imports in 2018, many companies upended supply chains to shift manufacturing. New threats of complex and ever-shifting tariffs on imports from all countries force companies to choose between the expensive and the impossible. Some will likely decide manufacturing elsewhere is more cost effective even with tariffs.
I believe President Trump is doing what he thinks is best for our nation, but the ultimate goal—moving most manufacturing back to the United States—isn’t possible in the short term. Even in the mid- to long term, reshoring supply chains will be costly. We don’t have the skills, technology, or labor force to make everything in the United States. To paraphrase Apple CEO Tim Cook, the Chinese have convention centers full of factory designers. Americans with the same skills would fit in a small convention center room.
More, while President Trump keeps talking about new jobs generated by U.S. factories, those jobs are mostly in construction. Where will these construction workers come from? Anyone who needs to get work done in their home has experienced our acute labor shortage. With near-full employment, rebuilding from natural disasters in California, Florida, and North Carolina, and a likely shortage of workers given deportation threats, we’re tapped out. Once built, U.S. Secretary of Commerce Howard Lutnick has also said that these new factories would be highly automated and require very few workers.
President Trump was elected based on pocketbook issues. Americans want to see prices and inflation go down, not up. With the country still on a “solid pace” for economic growth, refocusing on the fundamentals could deliver huge dividends for Americans and the world.
To start, President Trump should focus on cutting inflation. This will drive down interest rates, save trillions in interest payments, and improve Americans’ standard of living. Across the board tariffs are inflationary. Our inflated health care costs could soon be an unfortunate model for all products, as Americans pay double or more than what other countries pay.
Tariffs should be used strategically as a tool to reduce barriers to trade. If we want to boost U.S. manufacturing and help American companies compete on the world stage, that means avoiding tariffs on components and raw materials like steel and aluminum. To deliver a boost to America’s coffers, we could look to eliminate the $800 de minimis exception for imports from non-allied countries. Americans like low-cost products and this loophole, often exploited by Chinese companies, puts American retailers and other businesses at a huge disadvantage. China’s tariff-free exports grew from $5.3 billion in 2018 to $66 billion in 2023, as the country supplied more than two-thirds of U.S. de minimis imports.
Removing barriers to U.S. factory investment would also jumpstart American manufacturing, without the sting of tariffs. President Trump is already helping by cutting unnecessary and costly rules. With business-friendly majorities in both the House and Senate, now is the time to push for more changes to unleash American innovation. We can cut the U.S. litigation tax by adopting a ‘loser pays’ system; limit opportunities for departing employees in protected classes to shake down employers; crack down on predatory patent trolls; clarify class action rules so lawyers are not the only winners; and tighten product liability and securities rules.
Finally, we should recognize that the United States can’t go it alone. Friendly, democratic allies have different strengths in manufacturing technologies. The Dutch produce great semiconductor equipment, for example, and South Korea makes great entertainment products. The Trump Administration should build on that strength by negotiating bilateral trade deals with our friends and partners.
In his second term, President Trump has returned with the experience, cojones, and opportunity to change our national future for the better. I hope he’ll take it.
