Trump's "liberation day" tariffs.
Most of the economists I trust and follow (regardless of their political orientation) are absolutely, 100% sure that President Trump is in the process of making a massive, term-defining mistake. They are predicting rampant inflation, a recession, and an era of economic disruption that is entirely of his making. They similarly predict that this tariff strategy will isolate us from our most important trading partners and push them into China’s sphere of influence, an outcome that would be antithetical to one of Trump’s core goals.
I’m open to the idea that our trade policies, founded on an obsession with growth and cheap goods, are hurting us.
If Trump’s goal is to reduce the barriers on American exports other countries have erected, he may well get a few wins. Israel, for instance, already agreed to lift all duties on U.S. imports in an effort to be exempted from new tariffs. Trump can already point to Apple, Johnson & Johnson, Eli Lilly, and Hyundai as major companies who have been talking about expanding their manufacturing operations in the United States. Yes, Trump’s belief that trade deficits represent us being taken advantage of is totally wrong, but it doesn’t make those potential gains any less real.
Treasury Secretary Scott Bessent believes a lower yield will force the Federal Reserve to cut rates, which the administration wants. After the tariff announcements, the ten-year T-note yield fell — potentially the exact indicator Bessent was looking for.
Even if those goals amass into coherence, with no articulation of the administration’s long-term strategy on file, supporters are left offering haphazard, conflicting explanations.
If the point is to force other countries into reciprocity and fair trade, then why did Trump move forward with a large tariff increase on Israel after it removed all its tariffs on us? If it’s to impose reciprocal tariffs, why is the Trump administration using a custom formula to levy these tariffs based on trade balances rather than tariff rates?
How should small developing countries react? Some of the territories on the tariff list don’t even have inhabitants. It could take a country like Cambodia years to prepare before reducing its tariffs on the U.S. without cratering its own economy. Lesotho, an African country with a GDP smaller than that of most U.S. territories, just got hit with a 50% tariff rate because it’s a part of the South African Customs Union (SACU). How does Lesotho work its way out of these tariffs without South Africa? And why did South Africa get a lower tariff rate than Lesotho when both tax us equally?
Our treatment of Indonesia is another head scratcher. Indonesia has a high tax on coffee imports because it is a major exporter of coffee. Trump has slapped a 32% tax on coffee imports from Indonesia, even though the United States exports zero coffee to Indonesia. Where’s the reciprocity there?
We import 98% of the clothing sold in the U.S. — primarily from Southeast Asia. Are we supposed to divert hundreds of thousands of Americans from higher-paying jobs to manufacture clothing, stand up those manufacturing plants, and start producing our own clothes? How does that help us?
How does this help us confront China? If they are a more open trading partner than we are, won’t we lose trading partners — and therefore political power — to them? What’s the plan there?
What is the explanation for the exceptions? Oil imports have been exempted from Trump’s tariffs, as have semiconductors (something we actually need to be re-shoring the production of). What are the administration’s explanations for making these exemptions if the impacts of the tariffs are supposed to be so uniformly strong? We don’t know, and they don’t say.
Let’s not forget that we are mostly living in Trump’s trade world — the one he created in his first term by abandoning the Trans-Pacific Partnership, signing new trade deals, and levying new tariffs — most of which Biden did not change in any meaningful way. He called those deals the greatest in history; now he’s trumpeting broad tariffs by arguing they are all terrible deals.
he’s also been beating the drum of “short-term” pain for long-term gain.
How short? Six months? A year? His entire term? We don’t know and he doesn’t say — but his administration will be kneecapped in 2026 if the plan is to let Americans’ stock portfolios and retirement plans crater while he promises a golden age of manufacturing sometime in the undefined future.
Murphy claims what Trump really wants is a means to compel loyalty from every business leader and industry — to solicit donations, public support, and fealty in exchange for sanctions relief. I don’t doubt that Trump relishes the power or influence these tariffs may afford him, but I think Murphy is wrong.
For starters, I don’t think this plan is going to draw industry leaders to the president for favor. I think it is going to draw their ire, and probably cost Trump some support.
I think Trump’s fundamental belief that the United States is getting ripped off by globalism is much like his view on immigration: It is one of the few genuine ideological perspectives that he is rigid and consistent on. He’s had it since long before he was in office, and tariffs have always been a key part of the resolution in his mind. With only one term left, he seems to earnestly believe he can pursue them without facing real political consequences — and without inflicting too much economic damage on the American people.