President TrumpƵs latest moves include a 10% tariff on all imports from China, a 25% tariff on steel and aluminum, and reciprocal tariffs on Canada and Mexico that could reach as high as 25%. These measures, justified as a way to Ƶlevel the playing field,Ƶ will instead exacerbate price pressures that the Federal Reserve has struggled to contain.
According to the Tax Foundation, the proposed tariffs will shrink CanadaƵs and MexicoƵs gross domestic product by 0.3% and ChinaƵs by 0.1%. They will also impose a $1 trillion tax hike on Americans, averaging more than $800 per U.S. household over the next decade.
The economic damage from these policies is staggering. The expanded steel and aluminum tariffs will raise taxes on Americans by an additional $53.7 billion Ƶ not by growing the economy but by squeezing businesses and consumers through higher costs.
This will disproportionately hurt American manufacturers that rely on these materials, making their products more expensive domestically and less competitive globally.
WeƵve seen this play out before: The 2018 steel tariffs caused more job losses in steel-consuming industries than the total number of steelworkers in the United States Ƶ an undeniable example of how protectionism backfires.
Tariffs donƵt hurt just businesses; they also hit working-class Americans the hardest. The new trade war is projected to reduce after-tax incomes by 0.8% in 2025, with middle- and lower-income households bearing the brunt of rising consumer costs.
This doesnƵt account for foreign retaliation, which is already in motion. China has announced counter-tariffs on $21.2 billion worth of U.S. exports, including liquefied natural gas, coal and large motor vehicles Ƶ industries that will see falling demand and potential job losses.
In reality, TrumpƵs tariffs are one of the most significant tax increases in modern history. If imposed, they will rank as the biggest tax hike since 1993 and the 18th largest since 1940. And for what? The justification that trade deficits hurt the U.S. economy is fundamentally flawed.
A trade deficit is not a sign of economic weakness Ƶ it reflects strong capital inflows and consumer purchasing power. Trying to ƵfixƵ it with tariffs only distorts markets and raises costs. The 2018-2019 trade war proved this: tariffs on $380 billion of goods led to higher prices, reduced employment, and a 0.2% decline in long-term GDP. This result is similar to the estimated drag on growth from an otherwise pro-growth agenda that I estimated during the first Trump White HouseƵs Office of Management and Budget.
Beyond the direct costs, these tariffs ignore the real causes of the decline in manufacturing in the United States.
Protectionists love to blame China for job losses. Still, the decline in Rust Belt manufacturing predates ChinaƵs entry into the World Trade Organization in 2001.
Although manufacturing output has continued to hit record highs, employment has stagnated due to automation, technological advances and government-imposed costs. High wages, excessive state and local taxes, and overregulation made operating in places like Michigan and Pennsylvania too expensive long before globalization became an easy scapegoat.
The solution isnƵt tariffs Ƶ itƵs lowering business costs in America.
A more pressing issue that TrumpƵs tariffs ignore is the overvaluation of the U.S. dollar, which makes American exports more expensive abroad and increases reliance on cheap imports. Runaway government spending and deficits are major drivers of the strong dollar, making it harder for manufacturers to compete globally. Yet, instead of tackling the root problem Ƶ government spending Ƶ Trump is opting for tariffs that further distort trade without addressing the issue.
If policymakers want to strengthen American manufacturing, they should focus on reducing the federal budget deficit to prevent excessive borrowing from propping up the dollar. Cutting government spending would ease inflationary pressures, allow interest rates to stabilize, and remove artificial barriers that weaken U.S. exports.
ThatƵs the right approach Ƶ not slapping tariffs on foreign goods that raise prices at home.
Republicans, traditionally the champions of free markets, are dangerously abusing economic nationalism. Protectionism is nothing more than big-government interference in the market, and it runs counter to conservative principles.
Free trade is a cornerstone of economic freedom, driving competition, innovation and lower prices. Conversely, tariffs stifle growth, increase government control and burden businesses with unnecessary costs.
The way forward is clear: reduce government spending, lower the budget deficit, embrace free trade and let markets work. Tariffs are a failed policy; history has shown they do more harm than good.
Vance Ginn is the president of Ginn Economic Consulting. He wrote this column for .
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