Trump’s tariffs could undo his ‘America First’ agenda

On Inauguration Day, President Trump reiterated his intention to raise tariffs across the board — including 25 percent for goods from Canada and Mexico.

When announcing the “External Revenue Service” to collect tariff revenue, Trump said, “We will begin charging those that make money off of us with trade.” This is a mistake, and it will work against other parts of his agenda such as deregulation, lower taxes and cheaper energy.

When it comes to Trump’s “America First” and “Make America Great Again” agenda of economic dynamism, tariffs are the odd policy out. They restrict Americans' freedom to conduct their business as they see fit.

Even though the U.S. may be in a position of strength when negotiating trade policy with any individual country, it cannot out-compete the rest of the world put together. And should most countries choose to retaliate, Trump’s tariffs might also cause more problems for the economy than most people realize.

From steel and aluminum to solar panels to washing machines, and in countries ranging from China to Canada, Trump’s first administration had no qualms about using tariffs. And, contrary to those who think tariffs are simply a negotiating tool, it appears that his second administration won’t hesitate to raise tariffs either.

But tariffs reduce economic growth. They don’t stimulate it. Tariffs are taxes and taxes everywhere and always make things more expensive. Home builders will see the cost of building materials rise when we tax lumber from Canada or tools from China. The cost of vehicles will rise as we tax auto parts and electronics from Mexico.

And, ironically, the price of oil in the U.S. will face upward pressure since we import more than $100 billion of crude oil from Canada. It would be impossible to list all the items that will become more expensive with tariffs since we import over $3 trillion worth of goods consisting of tens of thousands of different items.

Besides reducing America’s purchasing power, tariffs will also cut into many U.S. companies’ profitability. They will slow economic expansion. And they will push companies to make costly changes to their production processes and supply chains.

But won’t the resultant onshoring or reshoring be good for the U.S. economy? Surprisingly, no.

Some American companies will benefit, as will some U.S. workers. But those limited benefits will be dwarfed by the overall social costs. Economists have estimated that, historically, every job “saved” or “added” due to protectionist tariffs has cost nearly $1 million.

Nonetheless, Trump loves tariffs. He said, “To me, the most beautiful word in the dictionary is ‘tariffs’,” and “The higher the tariff, the more likely it is that the company will come into the United States.”

Yet tariffs don’t fit his agenda of reducing government inefficiency. Instead, they promote more government overreach and corruption by requiring a veritable army of bureaucrats and lawyers to decide what rates to put on products — and to collect the taxes.

Every industry, and even individual companies, will clamor for exemptions. This additional bureaucracy and favor-generating machine around tariffs is not what the American economy needs to succeed.

And it does not support the America First agenda.

Targeted tariffs on China to protect national geopolitical interests is one thing. But draconian across-the-board tariffs (especially on our largest trading partners) are absurd and will push them to trade with China more and raise their tariffs on U.S. goods. Domestically, tariffs will reward a few special business and labor interests at the sizable expense of ordinary Americans and economic growth.

Tariffs fly in the face of the rest of Trump’s economic agenda. They will reduce purchasing power. They will divert U.S. resources from high-value opportunities in AI, engineering and construction into industries producing goods that we used to import cheaply but will now have to produce ourselves.

The U.S. has the largest and most dynamic economy in the world. Trump’s agenda of cheaper energy, deregulation and low taxes will accelerate that economic vigor. Don’t slam the brakes with tariffs.

Paul Mueller, Ph.D., is a senior research fellow at the American Institute for Economic Research.

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