It’s ironic. One of the main reasons Donald Trump was able to win back the White House was his skillful exploitation of public dissatisfaction with the state of the economy. Yet his love for tariffs may make the economy worse, and allow the Democrats to win back the House of Representatives in 2026 and the White House in 2028.
You’ve been reading of significant stock market fluctuations over the last week. One of the reasons for market turbulence is uncertainty over what tariffs, against which countries, and at what rates are to be imposed. Businesses don’t like uncertainty, mainly because the greater the uncertainty over future economic and tax policy, the greater the difficulty businesses will have in planning for the future. They’re unhappiness is reflected by drops in the stock markets.
But tariffs themselves are frequently considered bad for business and the economy. Economists come in many different varieties—Keynesians, Friedmanites/monetarists, supply siders, etc., etc., etc. But if there’s one idea that unites most members in an otherwise intellectually and ideologically diverse field, it’s that tariffs are bad. Their rates should at least be minimized, and possibly eliminated to produce truly free trade.
But President Trump loves tariffs. He has said that the word “tariff” is the most beautiful word in the English language. To date, he’s been shaping his economic program around tariffs. But professional economists and their followers in the business community maintain that tariffs can have many deleterious effects, causing, among other problems, more inflation, unemployment, and.
How so?
Trump has said that tariffs are taxes paid by foreign governments who want to export products to the United States. Because foreign governments pay more when tariffs are higher, the American taxpayer will have to pay less. We can thereby afford the elimination of taxes on tips, overtime, and Social Security payments, as Trump has proposed, since tariffs will make up the losses.
But tariffs are not taxes paid by foreign governments. Tariffs in America are taxes paid by those who import products from abroad. And frequently those who import foreign products for resale in the American market, or to make otherwise made-in-America products, will try to recover the cost of the taxes they paid by raising the prices of the products they want to sell.
For example, automobile manufacturers need steel. The American steel industry produces about 80% of the steel used by American manufacturers, meaning they must import steel from other countries. If our government imposes tariffs on foreign steel, those who buy the steel to make the cars must pay the higher tax, which may then be added onto the overall cost of the car. Ultimately whoever buys the cars winds up paying the inflated price and thus ultimately pays the tariff as well. So Tariffs simultaneously increase our tax burden and the price we have to pay for our products. Inflationary.
But higher tariffs can also trigger more unemployment and deeper recessions. One of the worst pieces of legislation ever was the Smoot-Hawley Act of 1930, sponsored by two of the most economically illiterate Republicans in Congress and signed into law by President Herbert Hoover over the public protests of hundreds of economists. Its purpose was to raise tariffs high enough to protect American business from foreign competition at the dawn of what would become the Great Depression. Its result was to trigger punitive protective tariffs from other countries against American products which reduced the opportunities for American manufacturers to sell their products abroad. Many American businesses, cut off from international markets, collapsed, throwing their employees out of work as America slid into the Great Depression. As a former Republican and a long-time admirer of President Hoover—I would have voted for him enthusiastically in both 1928 and 1932—I have never believed the GOP was at fault for causing the Great Depression. Yet it must be admitted that Smoot-Hawley, which the GOP must own—caused the Great Depression to become far greater than it needed to be, and ushered in decades of Democratic dominance in American electoral politics. For example, following the passage of the GOP’s Smoot-Hawley, the Democrats won the next 5 consecutive presidential elections, controlled the Senate for 52 of the next 64 years, and the House of Representatives for 60 of the next 64 years.
If President Trump wants America to avoid another major recession or even a depression, and if he wants to save his own reputation and help the GOP of today avoid the fate of the GOP in the 1930s, he should immediately reverse his high tariff policies to reduce the chances for more inflation and unemployment. Otherwise, America will face tough economic times ahead, and the Democrats may well win back both the Congress and the White House, for who knows how long.
Malcolm L. Cross has lived in Stephenville since 1987 and taught politics and government at Tarleton for 36 years, retiring in 2023. His political and civic activities include service on the Stephenville City Council (2000-2014) and on the Erath County Republican Executive Committee (1990-2024). He was Mayor pro-tem of Stephenville from 2008 to 2014. He has served on the Board of Directors of the Stephenville
Economic Development Authority since 2018 and as chair of the Erath County Appraisal District’s Appraisal Review Board since 2015. He is also a member of the Stephenville Rotary Club, the Board of Vestry of St. Luke’s Episcopal Church, and the Executive Committee of the Boy Scouts’ Pecan Valley District. Views expressed in this column are his and do not reflect those of The Flash as a whole.
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