President Donald Trump is working on a joint Congress meeting at the U.S. Capitol on March 4, 2025.
Mandel Ngan-Pool/Getty Images
President Donald Trump speaks of tariffs as a job-creating giant.
The tariffs “create jobs like we’ve never seen before,” Trump said Tuesday during a joint session of Congress.
The economist disagrees.
In fact, they said that the tariff policies Trump pursued are likely to have the opposite effect, as Trump could take office.
“Working in America costs money,” said Mark Zandy, chief economist at Moody’s.
He classified widely imposed tariffs as “losing and losing.”
“There are no winners in the trade war here.
Customs Bargain
The Trump administration has announced a barrage of tariffs since its inauguration.
Trump has an additional 20% obligation on all imports from China. He placed a 25% tariff on imports from Canada and Mexico, two of the US’s biggest trading partners. (A few days after people came into effect, the president delayed taxation on some products for a month.)
The 25% tariff on steel and aluminum is set to take effect Wednesday, but the duties of copper and timber and mutual tariffs on all US trading partners could come in the not too distant future.
There is a seemingly simple logic to the protective power of such economic policies.
Tariffs generally aim to help us compete more effectively with our foreign competitors. US products look more advantageous, thereby lending support to domestic industries and jobs.
Workers will pour molten steel into a machinery manufacturer that will produce for export in Hangzhou, Z Jiang Province, East China on March 5, 2025.
AFP via Getty Images
There is some evidence of such advantages for the target industry.
For example, a 2023 report by the US International Trade Commission found that steel tariffs during Trump’s first period reduced steel imports from other countries by an average of 24%, from 2018 to 2021. They also raised US steel prices and domestic production by about 2% each, the report said.
The new steel tariffs set to take effect on March 12 could also “uplift” steel prices, according to foreign council researchers Shannon O’Neil and Julia Huesa wrote in February.
They said higher prices will benefit U.S. producers and likely add jobs to current personnel in the steel industry.
Customs duties have “sub-damages”
Tariff protection may “easing” the struggles of the US industry, but it will cost money, but Lydia Cox, an assistant professor of experts at the University of Wisconsin Madison University and international trade, wrote in a 2022 paper.
Tariffs create higher input costs for other industries and make them “vulnerable” to foreign competition, Cox writes.
These ripple effects have hurt other sectors of the economy and ultimately cost them work, the economist said.
For example, consider steel.
Steel rates increase production costs for other steel-intensive US industries such as manufacturing, automobiles, agricultural machinery, home appliances, construction and oil drilling, writes O’Neil and Huesa.
Cox studied the impact of steel tariffs imposed by former President George W. Bush between 2002 and 2003, finding that on average he is responsible for 168,000 jobs per year in the steel use industry.
In a recent Harvard Kennedy School webinar, tariffs are “a rather dull instrument.”
They “create a lot of side damage,” she added.
Why tariffs are “tax on exports”
The truck will head to the Ambassador Bridge between Windsor, Canada and Detroit, Michigan on March 4, 2025.
Bill Pugliano | Getty Images
Such damages include retaliatory tariffs imposed by other countries. This makes it even more expensive for US-based exporters to sell their goods overseas, the economist said.
According to a 2020 paper issued by the US Federal Reserve, by August 2019, duties imposed on products such as washing machines, steel and aluminum in Trump’s first phase had reached $290 billion in US imports by August 2019 at an average tariff of 24%. These taxes were ultimately found to have been translated into a 2% tariff on all US exports after considering foreign retaliation.
“Tax on imports is effectively a tax on exports,” Erica York, a senior economist at the Tax Foundation, wrote last year to the Cato Institute, a libertarian think tank.
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These damages to the US economy from first-term Trump tariffs are “evidently” newly created jobs wages, economist Larry Summers, former Treasury Secretary of the Clinton administration, and former US Senator (R-Texas) Phil Gram recently wrote in the Wall Street Journal Op Ed.
(President Joe Biden maintained a large portion of Trump’s tariffs.)
US trading partners have already begun a counterattack with Trump’s recent tariff tranche.
China has placed tariffs of up to 15% on many US agricultural products, the largest US export to China, starting Monday. Canada has also put $21 billion in retaliatory tariffs on US goods, including orange juice, peanut butter, coffee, appliances, footwear, cosmetics, motorcycles and paper products.
President Trump hinted at the potential economic pain of his tariff policy during his speech to Congress.
“There’s a bit of a hindrance, but that’s fine,” he said. “That’s not a big deal.”
Many economists have yet to predict a US recession, but in a Fox News interview on Sunday, Trump did not rule out the possibility of a recession as tariffs take effect. When an economic recession occurs, the protected sector will also become heavier, the economist said.
Voters were elected on an order to enact an economic agenda for President Trump, including tariffs, White House spokesman Kush Desai said in an emailed statement.
“Taxes played a key role in the rise of the US industry dating back to the 1800s through William McKinley’s presidency,” Desai said.
“Unfortunate Consequences” of Trump-era tariff policy
There is a historic precedent in the business war. Smoot Holy tariffs in 1930 caused export cuts and failed to raise farm prices for farmers at Michael Strain, director of economic policy research at the American Institute of Corporate Research, a conservative think tank.
Economists also believe that Smoot Holy tariffs have exacerbated the Great Repression.
Economic policies almost a century ago do not necessarily refer to what happens in modern times, but protectionist policies since 2017, like Smoot Holy, wrote that there were “disappointing consequences.”
Recent evidence suggests protectionism can actually hurt workers trying to help, Stock said.
For example, Trump’s first term tariffs reduced total manufacturing employment by 2.7%, written in 2024 by Federal Reserve economists Aaron Flaen and Justin Pierce. That is, they found after tariffs accounted for a 0.4% increase in manufacturing employment.
The 2018-19 trade war “failed to revive domestic manufacturing,” and in fact, Strain writes, it cut jobs in a wide range of manufacturing sectors.
The proportion of US employment from manufacturing employment has been declining since the end of World War II. This is mainly because technological advances have increased productivity for workers. He said it would be more helpful to direct economic policies to connect workers to future jobs.
“Like technological advancements, trade is destructive, but trying to bury Amber’s US economy is not a beneficial response,” he writes.
