Thought of the Day August 1st, 2025

Tariffs are regressive and fighting the tides of free markets. As President Trump once again extends deadlines for his Liberation Day tariffs, it appears the world has moved to a new reality with tariffs. Mostly due to Trump's protectionist outlook of the world, the rest of world has had to come to the table with the US. Will this generate the manufacturing jobs and domestic industrial investment that Trump says he is fighting for? I would beg to differ. I propose an alternative objective for the Commander in Chief. The President is just looking for headline capturing deals to cement his legacy as a tough dealmaker, but those deals will be impossible to enforce, drive up prices for consumers eventually, and not achieve the desired results.

Just look at the deal made with the EU earlier this week. Trump will lower the tariff rate to 15% on goods coming into the US from the European Block, and Europe in turn committed to "intentions" to buy $750 billion of US energy products over just 3 years and invest an additional $600 billion in US projects. That sounds incredible before you realize that the EU has no binding power to force private energy companies to buy any energy products from US. The investment dollars is similarly unenforceable.

The MAGA base has a nostalgia for a bygone era where the US was a manufacturing superpower and an export economy. That era is over. The US labor market(with the exception of the illegal immigrants that Trump wants gone) is incredibly expensive while not being similarly higher quality than the labor forces of Asian competitor nations. The jobs that have left the US are now mostly completely gone, replaced by advanced automation, machines, and AI. The US has transitioned itself into a service driven nation. The leaders in banking, financial markets, biotechnology, and entertainment, the US has transitioned away from the hard labor jobs of the past.

For this reason, the Trump tariffs are a futile attempt to reverse course against a giant tide of automation and the country's own work preferences. While I can see the need to protect industries of national security like computer chips, steel, and automobiles. These wide ranging tariffs are short sided.