President Trump declared April 2 “Liberation Day.” Reciprocal tariffs were initially expected to go into effect this week, but have now been paused for 90 days — for all our trading partners except China, of course, which was hit with a 125 percent tariff after their retaliation to Trump’s announcement.
Trump said Wednesday all 75 countries that contacted the U.S. to negotiate new trade deals will only face a 10 percent across-the-board tariff, rather than the much larger ones threatened last week.
Critics claim tariffs will cause inflation. This is misleading.
Although there will be short-term market adjustments — as is the case with any significant policy shift — tariffs will not cause long-term inflation. In fact, they will lower the cost of goods over time.
Not only that, but tariffs will lower the price of real estate, providing significant relief to millennials and the working class, who struggle to afford rent and mortgages.
Fiddling While Rome Burns
Contrary to popular belief, tariffs did not raise the cost of goods during President Trump’s first term, and they are not likely to do so the second time around. Why?
First, tariffs are import taxes; that is, a 25 percent tariff on steel would increase the price of steel coming from Canada or South Korea — but not steel that was made in America. Tariffs are a completely avoidable tax. If you do not want to pay tariffs, buy American.
This not only creates an economic incentive for consumers to buy American, but it also creates an incentive for foreign producers to lower their costs. If countries like China or Mexico want access to America’s market — which they do — then they will have to find a way to reduce their costs to balance out the tariff. Ultimately, lower production costs benefit everyone.
Critics will argue that even if you buy American, you will still end up paying more. Why? American goods cost more to begin with, and without foreign competition, American businesses will price-gouge.
While this may or may not be true in the short term, it is false in the long term. America’s manufacturing industry is among the most productive in the world. Given that productivity is what drives prices, America’s manufactured goods should also be among the cheapest in the world — and they are.
The problem is that prices are skewed by economic externalities, foreign currency manipulation, and predatory trade practices. This results in efficient American factories being closed, while inefficient foreign factories — in places like Italy and Germany — remain open for business. Protecting American markets from abuse will help our domestic free market function more efficiently. This will lower costs over time.
Tariffs will reshore American factories, and thereby increase domestic output. Manufacturing is an interesting industry, because prices are subject to increasing returns. That is, the more that we manufacture, the lower the price of each unit of production becomes. This is because capital costs are fixed, and the more we make, the more these costs are disbursed. Thus, we have good reason to expect that the prices of American products will actually decrease as production ramps up.
Finally, the only way to decrease prices in the long run is to increase productivity — to invent and implement new technology. The best catalyst for this is higher input cost, particularly labor costs. We can expect that companies who reshore their factories from places where labor is plentiful and cheap will be looking to invest in capital and technology that improves productivity. In the long run, this will drive invention and innovation and lower the cost of goods — not just for Americans, but for everyone.
The world prospers when America prospers. Tariffs are an effective tool to rebalance America’s economy away from financial interests — moving money — and into productive investments. Tariffs will realign the economy toward building the future, rather than buying it.
The Other Side of the Coin
The President’s critics cry wolf that the price of goods will increase. What they fail to mention is that America pays for the trade deficit by selling assets and debts. This raises the prices of the assets and debts, creating inflation of a different kind.
For example, in 2024, foreigners bought an estimated $42 billion of residential real estate, $8 billion of agricultural land, and $12 billion of commercial real estate. This drives up real estate prices, locking our own young people out of the real estate market — denying them their share of the American Dream.
In addition to real estate, foreigners buy American businesses. As of June 2023, foreign investors own 17 percent of all American equities. Ownership of our businesses has dire consequences, such as giving foreign governments direct access to our technologies. This perpetuates the massive theft of American intellectual property, which costs hundreds of billions annually, and jeopardizes our national security.
We also trade debt. This is sort of like buying groceries on our credit cards, except it is occurring at the national level. For example, foreigners own some $8.67 trillion of U.S. Treasury securities, accounting for 24 percent of the public debt. This process has caused America to become a debtor nation — for the first time since the Great Depression — and it costs us more than $150 billion every year in interest.
Critics of tariffs say they want to keep the cost of goods low — but in doing so, they increase the cost of housing and saddle us with debt. They are simply prioritizing one type of inflation over the other — prioritizing elite interests over those of ordinary Americans.
In the end, President Trump’s tariffs will not cause inflation. Instead, they will create millions of jobs, rebuild America’s industry, and revive the American Dream.
The views expressed in this opinion article are those of their author and are not necessarily either shared or endorsed by the owners of this website. If you are interested in contributing an Op-Ed to The Western Journal, you can learn about our submission guidelines and process here.
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