In a word, I believe it’s extremely misguided. Here’s why.

First, what problem is Trump trying to solve? The only justifications he has made are that (1) the U.S. is being economically “ripped off” through other countries’ tariffs, and (2) we need to bring manufacturing back onshore (presumably to increase jobs).

Let’s tackle the rip-off first. How is the current global trade system harming the U.S.? According to wealth advisory firm Henley & Partners the U.S. currently accounts for nearly a third of the entire planet’s investable wealth. Our share of global equity market capitalization has climbed above 60%. We have the highest GDP of any country. And all this has occurred under a trading system that’s been pretty stable for the past 75 years. From an economic standpoint it’s hard to make the case that we’ve been harmed by other countries’ trade practices. And if Trump is mostly concerned about our trade deficits, the Cato Institute has found that higher deficits do not correlate with either greater unemployment or with lower GDP growth. In other words, it’s far from America’s biggest problem.

Will the tariff war bring back more manufacturing onshore? Financial advisor Cullen Roche argues that factory jobs will all but disappear in the future anyway due to robotics and AI. If Trump wants to stimulate job growth, manufacturing is the wrong sector on which to focus. And even if it were a good idea, there are better ways to encourage companies to invest more in domestic factories. For example, offering tax breaks and other financial incentives that have worked in the past to incentivize capital investment locally. 

Which brings us to another question: Is Trump’s approach to solving the so-called tariff problem effective?

My impression of Trump’s style of deal making is that the other party has to lose in order for Trump to win. Instead of trying to negotiate a solution that each party can feel good about, Trump uses threats and bullying tactics to try to coerce the other party to capitulate. Wouldn’t it have been more effective and less disruptive to have begun negotiations with each country individually and privately rather than unilaterally announcing punishing tariffs? Trump’s manner has caused our allies to question the mutually-supportive relationship they’ve had with the U.S. for decades. And our adversaries have unsurprisingly reacted with their own escalating threats, which can lead to global turmoil.

Even worse, Trump’s back and forth flip-flopping on tariff amounts and timing has additionally created a level of uncertainty not seen in the past eighty years of American history. What U.S. business leader would take any action relative to Trump’s pronouncements knowing that they could be completely reversed in a matter of days? The process of rebuilding manufacturing capacity in the U.S. is costly and time-consuming. By the time such a major project will have reached completion, Trump’s term of office will be close to finished. Under these circumstances business leaders are much more likely to freeze their capital spending until such time as they can see some rational policy stability emerging. The most likely outcome of such a scenario would be a recession in the near term.

The single biggest factor supporting the growth of human civilizations has been trade. Where trading has flourished historically, so too has the prosperity of nations. Despite Trump’s view of tariffs as a tool for punishing other countries for his perceived slights, they are in reality a tax on imports which will drive prices higher for American businesses and ultimately consumers. He was elected in part on the promise of reducing inflation. This is far from the most practical way to accomplish that.

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