Last week, President Trump announced “Liberation Day” and imposed tariffs on nearly every country, with a base 10% tariff and “reciprocal” tariffs for individual countries. The Trump administration is claiming that these will stop other countries from ripping us off and bring back manufacturing to the U.S. In reality, these tariffs are a messy, economically disastrous tax.
Tariffs are a tax on Americans
At first glance, tariffs seem to be a tax on only foreign producers because they are the ones paying the government directly. However, the market determines how much of a tariff is paid by consumers and how much is paid by producers. This is known as tax incidence. The tariffs will most significantly increase costs for consumers when it comes to goods that have inelastic demand (consumers aren’t very responsive to price changes in these goods) and could include necessities like food and medicine, which would be especially detrimental.
The response of the stock market to the tariffs is also hitting Americans’ pocketbooks. Within three days of the tariff announcement, the stock market lost over $6.5 trillion. This isn’t just bad news for the wealthy on Wall Street. More than one-third of working-age people invest in a 401(k)-style retirement account, according to the U.S. Census, which means the losses in the market will hurt countless Americans and could delay retirement.
One of the main purposes of the Trump tariffs is to bring back manufacturing jobs. The most prominent (and Michigan-centric) symbol of manufacturing is the automaker. However, tariffs completely backfire. Parts of cars, such as engines and transmissions, can cross the U.S.-Mexico and U.S.-Canada border up to seven or eight times before being assembled into a complete vehicle. This means that American car manufacturers will face a stacking effect of tariffs that manufacturers outside the U.S. won’t face. Though Canada and Mexico are excluded from the “Liberation Day” tariffs, they face a tax on auto part imports that will be implemented on May 3 and pointing to the tariff’s shortcomings for bringing back manufacturing.
Trump tariffs aren’t actually reciprocal
President Trump claimed that the tariffs are “reciprocal – that means they do it to us and we do it to them.” He claimed that it “can’t get simpler than that.” But on a closer look, the numbers are fishy. President Trump held up a chart with tariffs, price manipulation, and trade barriers that each country imposes on the U.S. as a percentage. These numbers are suspiciously high. The chart claims that the tariffs and trade barriers imposed by China are 67%, yet China only charged the U.S. about 23% tariffs last month.
In fact, to find the “tariffs and trade barriers,” the administration simply plugged the U.S. trade deficit and U.S. imports from a specific country into this equation:
Tariffs and trade barriers = ( U.S. Trade Deficit With Country Y / Imports of Goods From Country Y ) x 100%
This number is then multiplied by ½ to calculate the tariffs the U.S. will impose. So, the tariffs are not reciprocal. They are a percentage found from an arbitrary equation, completely based on the trade deficit.
Trade deficits aren’t inherently bad
In the aggregate, the U.S. runs a trade deficit, meaning that we import more than we export. President Trump argues that this means that the U.S. is getting ripped off. But that’s not necessarily true. Higher trade deficits do not correlate with higher unemployment, and higher trade surpluses do not correlate with higher GDP growth, according to the Cato Institute. Additionally, the U.S. has a service trade surplus, meaning that we are exporting more services to other countries than they are importing. Also, free trade gives us an amazing number of options and low prices that protectionism or autarky never will.
The President might not have the power
The Constitution is very clear: Congress has the power to regulate commerce and impose taxes (U.S. Const. art. I, § 8). However, under the International Emergency Economic Powers Act and the National Emergency Act, the president can declare an emergency and then implement related tariffs through executive order. To do this, the Trump administration claims that “foreign trade and economic practices have created a national emergency.”
At a glance, this might seem justified. In early 2025, the trade deficit spiked. However, this was because businesses were importing in preparation for Trump’s tariffs. In other words, President Trump’s threatening tariffs increased our trade deficit. Beyond this, the White House Fact Sheet acknowledges that the trade deficit has been persistent while arguing that this is an emergency. That begs the question: Why was a deficit “emergency” not declared over the last couple of decades?
Alternative course for the tariffs
With the rescinding of the tariffs on all countries but China, it seems much of the original posturing about the tariffs being a negotiating ploy seems a real possibility, and the remaining tariffs should be reduced or rescinded. As a free market-conservative, I oppose reckless taxes on American consumer industries with no legitimate objective or constitutional mandate. Even if the tariffs are just a negotiating tactic, the plummeting stock market and unpredictable business environment are highly damaging.
