Tariffs: Political Theatre with Real World Consequences

I’ve been fortunate in my career. Working in Silicon Valley during the technology boom felt like standing at the epicenter of excellence —a whirlwind of big ideas and unparalleled growth. In 2014 I relocated to Utah, the leader in direct-to-consumer product innovation, a period when technology allowed new brands to connect with audiences like never before. Through all of this, I learned an important lesson. One that is undoubtedly shared by many of the successful executives who built fortunes in those same places, but who have now chosen self-interest over our nation’s interest. Excellence comes from building, not tearing down.

Unfortunately, this lesson seems lost in our nation’s current reliance on tariffs —a policy that historically failed and will again.

The Problem with Tariffs

Tariffs are touted as mechanisms to protect American jobs by making imported goods more expensive. This narrative is flawed. Most goods subject to tariffs are no longer produced in the U.S. and never will be. As someone who has built two U.S. manufacturing facilities, I’ve seen firsthand how challenging domestic manufacturing is. Beyond finding equipment, facilities, and a workforce, manufacturers face shortages in raw materials and a lack of support for infrastructure that has eroded over decades. The fact is, for most industries, local manufacturing is simply not feasible.

Some argue tariffs punish unfair trade practices, particularly from nations like China, or pressure them to crack down on violations of U.S. laws. It’s true that China often operates outside the bounds of fair trade, and they do not always share our appreciation for the rule of law. These imbalances must be addressed and there are mechanisms to do so. I ask, at what cost are we pursuing this tariff strategy and will it work?

The Costs of Tariffs

Since the implementation of new tariffs in 2018, the costs have been staggering and they will get worse;

Global Retaliation: Retaliatory tariffs have hit American farmers hardest. The U.S. Department of Agriculture estimated retaliatory measures cost American agricultural exports over $28 billion. Retaliation from key trading partners like Mexico and Canada will now threaten our critically important automotive industry.
Job Losses: A June 2024 report from Taxfoundation.org revealed that tariffs have cost the U.S. 142,000 jobs, with proposed increases potentially eliminating another 684,000 jobs.(2)
Reduced Spending Power: The Petersen Institute for International Economics estimates that tariffs cost the average household $2,600 annually, a burden that disproportionately affects low- and middle-income families. (3)
Higher Prices: Tariffs drive up consumer prices, with retail costs for affected products increasing by 10% to 30%, according to the Journal of Economic Perspectives. (4) According to an article in the Washington Post by David J. Lynch from October 2024, Retailers like Walmart have already warned of price hikes, and companies such as Columbia Sportswear and AutoZone are following suit.(5)

Despite years of tariffs, what has been achieved? Promises of revitalized domestic industries, job creation, and reduced dependence on China have fallen short, while American farmers, small businesses, and households have paid the price for lost export markets and higher costs.

New Tariffs, Same Consequences

The proposed tariffs from the incoming administration, including a 10% additional tariff on China and 25% on Canada and Mexico, will negatively impact an already fragile U.S. economy. Here’s what lies ahead if these measures are implemented:

Inflation: Tariffs will raise the price of goods across the board. Families and small businesses will pay the price for these decisions.
Inefficiency: These tariffs will increase costs and lead to lower-quality goods with longer delivery times. The vast majority of companies that have moved supply chains from China have had to grapple with serious inefficiencies. Many companies will not survive the impact on their supply chains.
Cronyism: Politically connected corporations often secure tariff exemptions, creating an uneven playing field. A study in the Journal of Financial and Quantitative Analysis revealed that companies donating to Republicans after the 2018 tariffs were more likely to receive exemptions, while Democratic donors faced negative impacts. Small businesses unable to navigate this “pay-to-play” system are at a severe disadvantage.
Retaliation: Other nations will respond to tariffs of their own. Farmers, automobile manufacturers, home builders, and small businesses will shoulder the impact of these retaliatory measures.

Tariffs: A Better Path Forward

Tariffs are a short-term solution with long-term consequences—a political Band-Aid masquerading as a fix. They don’t strengthen America, they burden businesses, workers, and consumers.

To truly “make America great,” we must focus on building, not destroying. Excellence isn’t achieved by pouring water into the gas tank and expecting better mileage. It’s achieved by fueling innovation, investing in people and institutions, empowering entrepreneurs, and fostering global partnerships. That’s the path to greatness—and the only one worth taking.

Brian Sather

CEO, Blacksmith International

Sources:

Stephen Morgan, Shawn Arita, Jayson Beckman, Saquib Ahsan, Dylan Russell, Philip Jarrell, and Bart Kenner, “The Economic Impacts of Retaliatory Tariffs on U.S. Agriculture”, from the Economic Research Service, US Department of Agriculture.
Erica York, https://taxfoundation.org/research/all/federal/tariffs/
Kimberly Clausing (PIIE) and Mary E. Lovely (PIIE), The Petersen Institute for International Economics, October 2024. https://www.piie.com/research/piie-charts/2024/trumps-bigger-tariff-proposals-would-cost-typical-american-household-over
Mary Amiti, Stephen J. Redding, David E. Weinstein, Journal of Economic Perspectives, “The Impact of the 2018 Tariffs on Prices and Welfare”, Fall 2019
David J. Lynch, Washington Post, October 2024, https://www.washingtonpost.com/business/2024/10/30/companies-tariffs-trump-prices/
Veljko Fotak, Hye Seung (Grace) Lee, William L. Megginson, and Jesus M. Salas, Journal of Financial and Quantitative Analyisis, July 30, 2024