The US Economy is on a Collision Course with Disaster
A Tariff-Ridden Trainwreck
The Trump administration’s latest move is a set of globally applied tariffs that make no sense on their face. No sane economist would endorse this. Through a combination of stupidity, incompetence, and sheer gangsterism, the Trump administration has decided to levy a series of taxes that encourage blatant corruption, entirely fail to encourage American manufacturing growth, and leave people and companies poorer. That is, assuming that the taxes come into play at all.
Experts Weigh In
Chris Barrett, professor of economics at Cornell University’s SC Johnson School of Business, says, "This is the craziest of the crazy things we’ve seen thus far." Christopher Meissner, a professor of economics at the University of California Davis, adds, "This is probably the biggest single-day tax rise and for sure the largest tariff since World War I, if not ever in the history of the country." Justin Wolfers, a professor of economics at the University of Michigan’s Ford School of Public Policy, says, "This is a bad idea and it’s going to hurt Americans." Paul Krugman writes, "There’s so much wrong with this approach that it’s hard to know where to start." JP Morgan’s chief global economist warns, "There will be blood."
The Consequences
The US has shaken the world’s confidence, and there are consequences for that. Tariffs of any kind are disruptive. Since companies know they will be paying extra on items they import, they will pass the increase on to consumers, especially the poorest ones. They are likely to look for ways to cut costs and are unlikely to splash out on investments, says Meissner. Consumers are likely to do the same thing — cutting back on spending and holding onto necessities for longer than they would have otherwise, at least in part because they know there’s a higher likelihood they’ll be fired if companies trim costs.
Wages Will Likely Remain the Same
The design of these new tariffs amplifies all of this. They’re global with a minimum tax of at least 10 percent, so companies can’t easily avoid them by moving supply chains around, like many did during Trump’s first trade war. And already we are seeing disruptions. The Nintendo Switch 2 has delayed preorders. Advertising businesses — like Meta, Google, and Amazon — are bracing for pullbacks on spending, especially from Chinese companies. Expect the price of groceries, clothes, and cars in particular to rise steeply. China has announced its retaliatory tariff, which will doubtless make those estimated price rises worse, and it may be the first of many countries to do so.
The Economy was Doing Fine, But…
Let’s talk for a hot minute about how the economy was doing pre-tariff. That dip in consumer confidence predated the latest tariff announcement. The actions of DOGE — firing and unfiring people, slashing social services, freezing previously-agreed-on grants, and generally running amok in the government — already shook consumers. In March, consumers’ expectations for the future were the lowest they’d been in more than a decade. In particular, people were nervous about their employment, which is the kind of thing that leads people to cut spending.
A Great Deal of Economics is Basically Just Feelings
A great deal of economics is basically just feelings. People are feeling bad, and the tariffs have them feeling worse. That’s the kind of thing that can spiral into a recession. JP Morgan’s macro economist had previously put the risk of a recession at about 40 percent. That’s not the only bank to do so — S&P Global, Goldman, Barclay’s, Bank of America, and Deutsche Bank all agree that the risk is now considerably higher, though they disagree about how much higher.
The Ostensible Reason Behind These Tariffs
The ostensible reason behind these tariffs is to drive trade deficits to zero, but that makes no sense. A trade deficit essentially means that the US is receiving many goods and services from a country in exchange for pieces of paper, and they are receiving fewer goods and services (and thus giving us less paper), Wolfers says. Who cares? Economics isn’t a zero-sum game.
The Trump Administration’s Goal
Trump’s supposed ultimate goal is to bring manufacturing back to the US, but this isn’t going to happen either. That requires a less uncertain environment so companies will invest in building here, for one thing. It also requires a workforce — and it’s unclear why Americans would choose to work in manufacturing jobs as long as they have other options.
Conclusion
This is like watching a trainwreck in slow motion. The Trump administration has weakened the dollar, Congress has abdicated control over spending, and now the tariffs further endanger American wealth and safety. The only real questions are when we’re going to get the explosion, and how big it’ll be.
FAQs
Q: What is the purpose of these tariffs?
A: The ostensible reason is to drive trade deficits to zero, but experts say it’s a bad idea that will hurt Americans and the economy.
Q: What will happen to consumers?
A: Consumers will likely see price increases on imported goods, and may cut back on spending.
Q: Will wages change?
A: Wages will likely remain the same, even as everything costs more.
Q: What are the consequences of these tariffs?
A: The US has shaken the world’s confidence, and there are consequences for that. Tariffs of any kind are disruptive, and can lead to a recession.
Q: Can the tariffs be repealed?
A: It’s unclear, but experts say the best-case scenario is that they are abandoned.
