What I Don't Understand About Trump's Tariff Strategy

Plus a Nantucket VLOG

Donald Trump showing a tariffs chart; Wikimedia Commons

In today’s newsletter, you’ll find the following:

• The specific part of Trump’s tariff strategy I’m failing to understand

• A fun Nantucket VLOG

• Great stories from The Political Prism to get you smarter

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When President Donald Trump inherited the U.S. economy, it was very strong. Unemployment was near record lows, the stock market was near record highs (even before the 2024 election), and U.S. GDP and real wage growth were steadily climbing, with inflation steadily decreasing.

Trump had campaigned on tariffs during his 2024 campaign. So the fact that he is using them isn’t what’s surprising — it’s the intensity and scale of his tariffs. While most market participants and American trade partners likely didn’t take Trump 100% literally about his tariff threats, even those who thought he was serious probably didn’t anticipate this degree of intensity and scale.

In just a few days, Donald Trump’s tariffs have sent global markets into freefall, with some of the worst volatility since the onset of the pandemic in March 2020. I get that this is supposedly part of some grand strategy to use tariffs, tax cuts, and the re-onshoring of manufacturing jobs to create a new “golden age” for America. But there is one major part of this plan that I don’t understand. Aside from the basic presumption that Trump actually knows what he’s doing and isn’t just operating on political instinct instead of deep policy planning (I’m betting it’s all instinct).

What I’m struggling to understand is Trump’s definition of success.

Let’s assume this all works; that Trump somehow threads the macroeconomic needle by using tariffs, tax cuts, low interest rates (if he can get them), and the return of U.S. manufacturing to bring jobs and revitalized cities back to America’s heartland. Let’s assume he’s successful at doing all of these things.

That will take decades to play out. While big companies may be able to onshore jobs more quickly to America, they would still need to open factories (and in some cases build them), hire workers, and figure out their supply chains in a complex tariff environment (where countries like China have now retaliated with 34% tariffs of their own, for now).

Most businesses in America, however, are not big companies like Nike. Many are small business owners with a handful of employees who rely on imports from countries like China. Tariffs and trade wars are existential for these firms. They don’t have the resources to recreate those supply chains themselves in America, and they can’t survive paying an extra 34% in costs (and in some cases more). They will simply go out of business.

Even when considering big companies like Nike, how much impact will the onshoring of cheap labor have on American heartland towns? Nike pays manufacturing workers a few cents per hour in Southeast Asia to make their shoes. Even if they paid minimum wage to workers in Ohio, that’s still not sustainable for many people with families.

Not to mention the reality, which Vice President JD Vance described in his own book years ago, that many manufacturing towns struggle to fill open jobs with good workers. Which is why towns like Springfield, Ohio had to rely on Haitian immigrants to fill vacant jobs (remember those cats and dogs?).

So, we have a small business problem, a meaningful employment problem, and a labor shortage problem. And we’re just getting started.

Tariffs will increase the cost of goods throughout America in the short term. Inflation will rise. The availability of basic products will be limited, and their quality will likely be worse as there is less competition.

The fact that this type of economic protectionism is coming from a political party that used to be the most hawkish free market and free trade evangelists is shocking.

But let’s assume that Trump finds a way to weather these short-term consequences from his tariffs strategy. Let’s assume he proves the “experts” and people like myself wrong.

What is he going to do about technology? Tell companies to stop using robotics and machines in their manufacturing? Force companies to hire people instead of using the most efficient processes?

The reality is that most manufacturing jobs will be automated in just a few years. So even if Trump is successful in bringing manufacturing jobs back, and even if he somehow finds a way to incentivize companies to build and open factories, he’s swimming upstream against technological innovation.

What we should be doing instead is what JD Vance recommended in 2017:

Aaron Levie’s X account

Automation and education for America’s workers will take time. Just like the long-term effects of a U.S. tariff strategy. We likely won’t know if it has brought more jobs back and if any increased employment outweighs the consequences and costs of using tariffs at the size and scale that Trump is implementing.

As we have seen, in the short term, it’s ugly. I’m not optimistic about long-term tariff prospects because they generally don’t work well. The Wall Street Journal published a great piece highlighting four instances where tariffs hurt economies in countries like India and Argentina more than they helped. There was one exception in South Korea, but that’s hardly a comparable case to modern America because South Korea at the time was underdeveloped and impoverished following the Korean War.

America’s economy was the envy of the world only a few months ago. Yet Trump was and continues to be convinced that a tariff strategy would bring back 1950s American manufacturing.

But we are not in the 1950s anymore. Technology is not going backward. The world is globalized in terms of trade and politics. Trump can certainly try to fight against these forces, but the last time America tried to employ tariffs aggressively during the Great Depression, America’s economy got worse, not better. In an eerily similar situation to today, the Smoot-Hawley Tariff Act of 1930 raised tariffs to historically high levels and triggered retaliatory tariffs from trading partners while collapsing global trade and worsening the depression.

Even if this history does not repeat itself, what does success look like for Donald Trump? What is his time horizon? He only has a little over 3 years to make this work, assuming, of course, that he doesn’t try to defy the U.S. Constitution and run for a third term. And assuming he doesn’t simply refuse to leave office.

Regardless, we’re unlikely to witness the full effects of this tariff strategy in 3+ years. We’re also unlikely to see American heartland towns in Trump country completely revitalized during that period.

What we’re likely to be left with are the short-term consequences of higher prices, higher inflation, limited choices for goods to buy, and worse quality for whatever is available.

A golden age for the history books.

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An experience requiring gold: Nantucket

Now that the economy is in freefall, I’m not sure how many people will be vacationing in Nantucket in the near future, but I made this VLOG to capture our experiences there during a more stable time. Hope you enjoy!

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Relevant stories from The Political Prism

Want a better understanding of tariffs and the current political and economic situation? Read these:

• Tariffs And Truth: Why ‘Buying American’ Isn’t Simple by

  Neela 🌶️

• Trump’s Tariff Proposals Will Be the Nuclear Option in International Trade by Katharine Valentino

• The Assault on Big Law and Lawyers by John Polonis

• Elon Musk Is Going to Break Social Security by Dick Dowdell