To Tariff, or Not to Tariff?

To tariff, or not to tariff, that is the question to which President Donald Trump has, in recent days, given different answers. On Monday, hours before tariffs on Canadian and Mexican imports were scheduled to take effect, Trump paused them for 30 days. The next day, yet another tariff, this one on goods from China, came into force.

Before Trump announced the pause, the business press was, predictably, apoplectic. The Wall Street Journal said Trump was imposing tariffs on Canada and Mexico “for no good reason.”

America’s Founding Fathers were more open than the Journal’s editorial board to the virtues of protectionism. The Tariff Act of 1789, signed into law by President George Washington, was the first major bill passed by Congress.

So the president can rightly claim to be restoring a trade regime that helped make the country great in its early years. But that doesn’t mean tariffs carry no downsides. As Trump weighs the economic costs and benefits, he should also take heed of the political risks.

Some of those risks flow from the economic costs. Before Trump’s Monday reversal, the Yale Budget Lab estimated that the looming tariffs would, in the near term, reduce purchasing power per U.S. household by $1,250 on average and shrink the economy by 0.2 percent. That’s not catastrophic, but Americans living paycheck to paycheck would have felt the squeeze. On Sunday, Trump conceded that the tariffs may bring “some pain” for Americans.

Inflation played a big role in Trump’s election victory last November. If new tariffs cause Americans to pay more for groceries, sneakers and cars, then voters may start to blame Trump and economic nationalism, rather than Democrats and wasteful government spending, for high prices.

If any issue played a bigger role in the presidential campaign than inflation, it was immigration, as Trump himself has said. Securing the border and deporting illegal aliens makes America safer, boosts wages, and helps preserve the cultural inheritance of Americans, but it also puts upward pressure on prices by restricting the pool of cheap labor. If the business community pushes back on rising costs, Trump may find it easier to water down his immigration agenda than to back down on tariffs.

Waging economic warfare doesn’t just risk a backlash from domestic industry, but also from foreign nations. Since Trump announced the tariffs, Canadians have booed the U.S. national anthem at professional hockey and basketball games. Prime Minister Justin Trudeau, in a speech on Parliament Hill, conveyed his nation’s sense of betrayal, and his government readied retaliatory tariffs targeting red states. Canadian opposition to Trump’s move was bipartisan. Conservative leader Pierre Poilievre said that “there is no justification for these tariffs or this treatment.”

Tariffs, while weakening U.S. ties with allies, could strengthen their ties with U.S. adversaries. During the Biden administration, the European Union joined American efforts to “de-risk” trade with Beijing. But now, as Europeans await expected U.S. tariffs, the EU is reconsidering its stance toward China. “Believe me, that conversation is already taking place,” a senior European official told the Financial Times.

The essential economic purpose of tariffs is generally thought to be protecting domestic manufacturing. Here too, they could backfire, even absent retaliatory tariffs, since many imports serve as raw materials and components for production. While tariffs can lead to greater American prosperity in the long run, in the meantime they spook investors and send stocks plummeting. Trump, who is highly attentive to the stock market as a measure of his performance as president, no doubt took note of this effect on Monday.

Of course, economic factors are not, for Trump, the only consideration. Tariffs are a good way to extract concessions from world leaders, as Trump’s Canada and Mexico tariff threats were explicitly intended to do. On Monday, under threat of economic calamity, Mexico’s President Claudia Sheinbaum vowed to send 10,000 troops to help secure the border, and Trudeau agreed to ramp up efforts against fentanyl, a synthetic opioid that kills tens of thousands of Americans each year.

Tariffs offer Trump another political benefit. On the campaign trail, Trump was candid about his love of tariffs—“the most beautiful word in the dictionary,” he declared in October—so enacting them bolsters his credibility in the eyes of supporters.

They can also accomplish what states that implement them most hope to achieve: fortifying domestic industry. This doesn’t just benefit special interests, but the country as a whole. “Every nation… ought to endeavor to possess within itself all the essentials of national supply,” Alexander Hamilton wrote in 1791. Hamilton’s insight is important to remember in our own age, when America is dependent on China, its chief geopolitical competitor, for so many essential goods.

Globalists surely underestimate the advantages that economic nationalism can provide, in part because the strength and success of the United States isn’t, for them, top of mind. Still, as Trump works to make America great again, he should consider all the ways that tariffs are a mixed bag for his country, his movement, and his own political standing.

Politics