President Donald Trump’s new “Liberation Day” tariffs are framed as economic patriotism but a closer look reveals their fundamental flaws.

First, tariffs are taxes — and taxes suppress growth. The government cannot tax imports without taxing Americans. By raising costs on imports, these measures will primarily burden American consumers, just as the 2018 China tariffs did. Studies show nearly 100% of such costs are passed to U.S. households, eroding purchasing power without stimulating productivity.

Second, the policy misdiagnoses trade deficits as losses. Dollars spent on imports don’t vanish — they return as foreign investment in U.S. assets, from factories to U.S. Treasury bonds. If reducing trade deficits is the goal, fiscal discipline, not trade wars, is the only solution.

Third, while tariffs as a means of forcing others to drop trade barriers could make sense, tariffs for “re-industrialization” do not. Claims of a “hollowed-out” manufacturing sector ignore reality. U.S. factory output has roughly doubled since 1970, and while jobs have declined, automation — not offshoring — is the primary driver.  The American manufacturing sector as a share of the economy has declined from roughly 13% to 11%, but this simply means other sectors have grown even faster than manufacturing. Meanwhile, America dominates the world in exports of services and agricultural products.  

What is the real obstacle to expanding manufacturing?  Government regulation, which cost the economy $2–3 trillion last year — far exceeding trade deficits. Punitive tariffs won’t fix this; they’ll distort markets and alienate allies. Israel, for example, scrapped its U.S. tariffs expecting reciprocity, only to face a 17% rate. Even the U.K. — with whom the U.S. runs a trade surplus! — was hit with 10% tariffs.

Trade should be governed by economics, not political theatrics. These tariffs will tax Americans, stifle investment, and ignore the true levers of growth.

Sincerely,

 

Roger Butters, associate professor of economics

Michael Clark, associate professor of economics

Christopher Martin, associate professor of economics
Ivan Pongracic, professor of economics

Charles N. Steele, associate professor of economics

Abel Winn, associate professor of economics

Gary Wolfram, professor of economics

Leonidas Zelmanovitz, visiting professor of economics 

Qianying (Jennie) Zhang, associate professor of finance and economics