The announcement is an effort to impose sweeping changes on decades-old trading arrangements under which the United States increasingly outsourced some labor-intensive manufacturing to foreign countries in return for cheaper goods โ at the cost, critics have said, of Americaโs industrial base.
Trump argued that, instead, the United States has been getting โripped offโ by other nations while working-class wages have languished. In a call with reporters before the Rose Garden event, White House officials said the institutions that have governed world commerce โno longer fit the times.โ
But far from providing an immediate jolt to the U.S. economy, the tariffs are expected to take a toll on many companies whose products rely on global supply chains and now could be forced to raise prices or endure thinner profit margins. The White House and its surrogates have tried to communicate a message of patience and endurance, warning of some pain ahead, but for a trade-off that will be worthwhile eventually.
Itโs unclear how that will play with the American public, especially after Trump came into office with promises to stabilize or even lower prices following an inflation-heavy recovery under President Joe Biden after the vast economic disruptions of the pandemic.
Though Trump was elected because of his perceived ability to jolt the economy, he also spent much of his campaign promising to impose tariffs.
The latter appears to be winning out โ a reality that seems to have stunned economists, the business community and consumers, many of whom are his own voters.
โWhen confronted with the argument that Trump was talking big on tariffs, putting them on everything, the response was โItโll be the same as in 2016: He didnโt do it,โโ Michael Strain, director of economic policy studies at the American Enterprise Institute, a pro-business think tank, told NBC News ahead of Wednesdayโs announcement.
Instead, Strain said, โwhat weโve seen over the last two months is pretty light on traditional GOP policies and heavy on MAGA. Business leaders have been quite confused and disappointed with whatโs happened so far.โ
The tariffs effort has come in fits and starts, with proposals and reversals happening in quick succession. About 24 hours before Wednesdayโs announcement, White House press secretary Karoline Leavitt acknowledged that Trump and his advisers were still โperfectingโ the new policy.
As the Wednesday rollout bore down, countries continued to jockey to get ahead of the new duties. Vietnam and Israel indicated they would relax duties previously imposed on U.S. goods, while leaders in Europe were still holding out hope for negotiations.
Yet the mere threat of the tariffs has createdย massive uncertaintyย in the economy,ย causing stock markets to tankย whileย throttling businessย andย consumer confidence. The Federal Reserveย pre-emptively shiftedย its inflation forecasts higher for this year and next on the assumption that firms will respond to the higher duties by raising costs โย many of which are likely to be passed on to consumers in the form of higher prices for everything from avocados to lumber, cellphones, automobiles and more.
Although Fed Chair Jerome Powell said there was a chance the inflationary impact from the duties could end up being โtransitory,โ recent surveys have suggested consumers believe the momentum of price increases may only accelerate.
Businesses and consumers are already saying they foresee worse economic outcomes as a result of the tariffs. In the University of Michiganโs latest consumer confidence survey, consumersโ long-run inflation expectations had the largest three-month increase on record and are now at a 32-year high.
The same survey found two-thirds of consumers expect unemployment to rise in the year ahead, the highest share since 2009.
โThis trend reveals a key vulnerability for consumers, given that strong labor markets and incomes have been the primary source of strength supporting consumer spending in recent years,โ it said.
Businesses are already paying higher prices. An oil and gas industry executiveย told the Dallas Federal Reserveย in a survey published last month that the administrationโs tariff threats โimmediately increased the cost of our casing and tubing by 25 percent,โ while the administrationโs desire to see oil prices fall to $50 a barrel โhas caused our firm to reduce its 2025 and 2026 capital expenditures.โ
โโDrill, baby, drillโ does not work with $50-per-barrel oil,โ the person said.
Trump has given a host of rationales for imposing the trade duties, from reviving American industry to raising revenues to halting the flow of fentanyl and undocumented people. Wednesdayโs announcement is also a culmination of Trumpโs long-running fixation withย reversing Americaโs trade deficit; he has accused countries of โtaking advantage ofโ the United States and โripping us off.โ
Even before Wednesday, Trump was already claiming success, contending that private firms had committed to more investments in the United States in two months than in all four years of the Biden administration. While some businesses have indeed pledged to increase spending in the United States, analystsย have raised doubts about the extent of concessions he has receivedย from trading partners in response to the threat of higher duties or pointed out that many of the investment commitments he has touted were already in the works.
From an economics standpoint, many experts say, Trumpโs view of how trade works is outdated at best. It is true that inflation-adjusted median earnings experiencedย a multidecade period of relative stagnationย starting at the end of the 1970s. And for men,ย median earnings have actually been flat for the past 45 years.
But over the past 10 years, they have steadily increased for both sexes. And while the United States does have a large trade deficit, it remains a manufacturing powerhouse whose exportsย have never been more valuable even after adjusting for inflation.
The Trump administration nevertheless appears fixated on an economic-nationalist worldview and is prepared to enact it, no matter the ultimate cost.
โThe average wage in the services sector is higher than in the manufacturing sector,โ Strain said. โWe should not want to reallocate a whole lot of workers from higher-paying into lower-paying jobs out of some misplaced nostalgia for some imagined past. We should not wish for American workers to be sewing tennis shoes together โ they can have better jobs than that.โ
