Tariffs failing as Court cracks down

Gordon L. Weil

The big news was that the Supreme Court ruled that most of President Trump’s tariffs were levied illegally.   He so badly wants them to work, that he is trying again in a more limited way, but Congress could limit or stop him.

The real news is that the tariffs aren’t working to achieve his objectives.  In fact, they are hurting American consumers and the economy.  Nothing shows this more clearly that the desperate defense put up by Kevin Hassett, director of the government’s National Economic Council.

Trump had favored him to take over Fed leadership, but was forced to look elsewhere.  Hassett, an extreme Trump loyalist, embodied the notion that the president can control the independent Fed.  His obvious risk to Fed independence was more than Republicans and Democrats could accept. 

Last week, Hassett proved their judgment correct.  He wildly and incorrectly defended Trump’s tariffs in the face of evidence they weren’t producing promised results.

The Federal Reserve Bank of New York published a report showing that over the course of 2025, Trump’s tariff increases had mostly hit American consumers and businesses, amounting to a tax increase.  Hassett attacked the report, deriding it as not being worthy of an introductory economics class.

When import tariffs are increased, somebody pays them.  Trump believed that foreign producers would swallow the cost, enabling them to maintain their market share.  He saw their increased burden as punishment for underselling U.S. producers.  If they opted to pass their costs on to American purchasers, higher-cost U.S. production would become competitive.

The report showed that nearly 90 percent of the Trump tariff cost had been passed on to Americans, leaving only a small impact on foreign producers.   After attacking the study, Hassett then admitted the tariffs had caused “a slight increase” in U.S. prices.

But Hassett stuck with Trump’s optimistic view.  Even admitting that tariffs caused price increases, he argued that the benefits outweighed those costs.  After all, imports would be reduced, and American manufacturing would gain and add good-paying factory jobs.  Well-paid workers would be able to pay the higher prices of American products.

Hassett and, by implication, Trump were wrong on all counts.  Not only was the country spared his misguided Fed leadership, but Congress could come to understand that one of the key pillars of the president’s policies simply does not work.

Imports grew as companies stockpiled goods before the tariffs went into effect.  Then, they could be reduced while the resulting import goods were sold off and would stay down as U.S. production picked up.

Not so.  As reported by the New York Times, “U.S. imports grew last year, and the trade deficit in goods hit a record high …, as Mr. Trump’s policies scrambled trade but did not halt it.”   In fact, the deficit in goods, the object of trade battles, swamped the improved U.S. exports of services, not much affected by the tariffs.  Trump pays little attention to services.

Did the added tariff protection increase American manufacturing as Trump and his man Hassett predicted?  Not according to the manufacturers.  Their index showed that factory activity contracted during 2025.  Only in one month under Trump was there any growth.

What about manufacturing employment, which should produce more well-paid workers if the tariff policy works?  The manufacturers employment index fell by more than 10 percent, and the Times reported over 80,000 fewer workers.  The result was less employment in slimmed-down manufacturers.

The president is banking on Trumpenomics beginning to produce positive results before the November elections.  It’s likely that his biggest economic issue is affordability, a word he sometimes has difficulty saying.   That problem will only dissolve if consumer prices moderate.  Not all their levels are caused by tariffs, but tariffs give no sign of helping.

The truth has always been that most countries are not staging economic assaults on the U.S.  To the degree that the Chinese state economy has exploited American demand for cheap goods, Trump’s tariff policy has cut trade with China.   But it has simply moved to other low-cost countries like India, Mexico and Vietnam.

Trump likes to give the impression that the U.S. can be self-sufficient and is doing other countries a favor to trade with them.  Maybe it can do without French champagne, but it can’t do without Canadian electricity.

He continually claims the U.S. economy is booming, though the national economy slowed last year.  It is working well for the top 10 percent, relatively little affected by tariffs.  They also drive a climbing stock market, whose performance appears to be a prime Trump indicator of national prosperity.

He tries to jawbone average people into believing their economy is great and getting better.  He depends on the effect of tariffs to make his case, but Trumpenomics is not working.  The voters may provide a better economic index in November.