[Freight Weekly] Trump's Tariffs Could Harm U.S. Economy, Supply Chains

⚠️Warning: Regressive trade protectionism is closer than we think.⚠️

🤢As President-elect Trump inches closer to his inauguration day, stakeholders in many segments of the U.S. and international economies are concerned that his tariffs could harm the country’s economy and consumers more than he admits.

• Donald Trump, the Republican president-elect, is surrounding himself with China and Iran hawks and trade protectionists. For many in industry and trade, this is a bad thing. Economist Mary E. Lovely, a senior fellow at the Peterson Institute for International Economics, told news outlets that companies will see job losses as the United States continues to “de-couple” from China. Lovely said Trump’s new term will expedite this, especially with the levying of steep tariffs and trade wars.

• “The three key words for U.S. trade in 2025 are ‘uncertainty,’ ‘uncertainty’ and ‘uncertainty,’ and add ‘disruption,’” Lovely said, via a media briefing hosted by the Port of Los Angeles. Trump’s return to the White House is, ultimately, potentially destabilizing among international trading partners. For example, many provincial leaders in Canada have recently urged Prime Minister Justin Trudeau to work out a new bilateral trade deal with the United States, excluding Mexico and throwing out the first Trump-era landmark United States–Mexico–Canada Agreement.

• Trump’s posturing toward strict protectionism also comes with his appointments to key roles in his incoming administration. Howard Lutnick, chair and CEO of Cantor Fitzgerald, a fan of tariffs and protectionism, was named the Trump administration’s Commerce Secretary. Trump said, “He will lead our Tariff and Trade agenda, with additional direct responsibility for the Office of the United States Trade Representative.” With more power for USTR, this will likely lead to many more jurisdictional battles at Capitol Hill despite a unified GOP government.

• CEOs and other business leaders have warned that tariffs will not be felt by the governments of rival countries, like China, but the consumers across the United States. For a recent example, American Apparel & Footwear Association CEO and President Steve Lamar told Yahoo! Finance that his trade group’s members are concerned that costs for sourcing and supply chains will rise under Trump.

• In an interview with Supply Chain Dive, Mary Lovely added that supply chains will likely go domestic but would come at significant costs that aren’t a guarantee the U.S. economy will recover in the short- or long-term. Lovel said, “Not only is there the fixed cost of finding new suppliers and establishing new factories or partners, these companies now are almost surely paying more for the goods they used to source from China.” Trump’s hostility to Mexico puts nearshoring at risk.

• Trump’s trade strategy with Mexico includes mass deportations, including acts to illegally remove naturalized citizens, and to levy high tariffs on Mexico to punish companies who have set up shop in Mexico, especially along the border. Trump’s tariffs could drastically harm Mexico’s economy more than the U.S. further going forth and antagonizing one of the closest trade allies the U.S. government has left.

• Mexico officials have threatened tariffs against the United States in exchange.

• The libertarian Cato Institute notes overall harm in a recent analysis. “Tariffs’ net economic harms are one of the few issues on which almost all economists — left, right, and center — agree. Raising costs and introducing barriers to the efficient production of goods — and inviting other countries to respond in kind — will harm American consumers and businesses and ultimately harm the U.S. economy overall,” argued Colin Grabow, a policy scholar and Cato’s associate director for their constituent Herbert A. Stiefel Center for Trade Policy Studies study group.

Bottom line: Evidence is mounting that economic policies touted by the incoming president-elect, namely Trump’s tariffs and hardball with international trading partners, could have short- and long-term impacts on the U.S. economy, leading to rising costs.

WATCH: “You can't have high tariffs and low prices: AAFA CEO” - YouTube channel for Yahoo! Finance

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