Happy Liberation Day! The new tariffs will raise trillions of dollars from foreigners and result in an American industrial renaissance. Given the importance of the American market and the need for American military protection, the foreigners won’t dare retaliate. The tariffs won’t cause inflation, either, based on the events of the first Trump term. Just trust Trump, and the golden age will be at hand.
Except none of this is true. The tariffs cannot both raise huge sums of money and eliminate imports. They will be paid by American consumers, not foreigners. The industrial renaissance won’t happen for two reasons: since there is no guarantee that the tariffs will remain in place for long, business interests will be reluctant to invest in new factories; and if they did, there is no pool of workers to operate them, particularly after the mass deportations. Most of the foreigners will, in fact, retaliate, so the tariff proceeds will be needed to turn our great farmers into wards of the state. The combination of higher prices and lost consumer confidence will result in stagflation. The first Trump term tariffs, which were also a mistake, were lower and less sweeping, and there was little underlying inflation at the time, which is no longer true. Finally, Trump won’t be able to keep his hands off the wheel; there will be additions and subtractions to this list based on purely personal and geopolitical factors, so no one will be able to rely on it.
When the tariffs fail, as they will, Trump will become extremely unpopular. He will have three choices: get rid of them and spin the episode as some sort of a victory; keep them in place and blame the media, Biden, and the Democrats for any problems; or go full authoritarian to stamp out dissent. The story of the Trump presidency will be defined by the answer to that question.