Will Trump’s tariff gamble pay off?

President Trump’s “Liberation Day” announcement of widespread tariffs makes one thing abundantly clear: Trump is gambling that he can completely restructure a global economy that he believes is taking advantage of American workers.

This much was evident during his Rose Garden speech on Wednesday. 

In announcing tariffs between 10% and 50% on virtually every country in the world, Trump framed it as reciprocating against countries “ripping off America” and that it is “the day American industry was reborn.”

To be sure, Trump likely genuinely believes that tariffs will increase American manufacturing and exports, thus benefitting the economy as a whole.

However, as with any gamble, there are risks, and for Trump, the economic and political risks are significant. 

Indeed, the haphazard rollout of across the board, global tariffs threaten America’s economy and could even lead to a recession, or even stagflation, which may be even more damaging.

By erratically announcing these tariffs with no evident strategy other than saying “the markets are going to boom … the country is going to boom,” Trump is destabilizing the economy. 

In that sense, Trump is playing with fire by resorting to protectionist tariffs that could strangle the global economy.

Adding to the chaos is the method the White House used to calculate the tariff rate each country would face. According to The Verge, the formula is an “oversimplified version” of what ChatGPT recommends. 

The unprecedented formula has been widely derided by analysts and economists for “lacking intellectual rigor” and being “nonsensical.” 

Further, following Trump’s announcement, the average weighted tariff rate — 23% — is the highest in over 100 years, potentially worsening inflation, something Trump promised to defeat during the campaign.

As Steven Blitz, chief economist at TS Lombard, told the Wall Street Journal, tariffs are “a major tax hike” that eventually “will be translated into higher prices for the consumer.” 

As such, Torsten Slok from Apollo told CNBC, the risk of recession has “absolutely” risen due to Trump’s widespread, ill-conceived tariffs.

Moreover, there is the very real chance that America’s closest trading allies begin considering the U.S. an unreliable partner and forge closer ties with China, excluding the U.S. from wide swaths of global trade.

Adding to the unease America’s trading partners may feel, is that, for weeks, the administration said they were seeking only to put tariffs on countries with their own tariffs on American goods, as a “reciprocal measure.” 

Yet, Trump slapped 17% tariffs on Israel, which had already slashed their own tariffs on American imports to 0%.

The stock market reaction underscores just how significant these risks of prolonged uncertainty and half-baked tariffs are. 

All three major indices were down roughly 5% or more at the time of writing — the worst sell off since the height of the COVID-19 selloff – as companies struggle to adjust to the uncertainty.

With that in mind, will Trump’s gamble pay off for American workers, the American economy and his own political fortunes? 

It may be too soon to answer with any degree of certainty and much depends on whether these tariffs remain in force for a long time, or if they’re temporary negotiating tactics. 

One senior Trump advisor told CNBC that these tariffs are non-negotiable and are a national security issue, only for Trump to contradict the advisor within minutes, underscoring the lack of clarity the administration is providing.

If these trade policies are longer lasting, the U.S. economy will be — unnecessarily — forced to absorb the biggest shock since 1971, when the U.S. left the gold standard.

Taken together, there are very legitimate concerns that Trump is destroying the global economy for very little gain. 

According to the Labor Department, manufacturing jobs make up slightly more than 8% of total payrolls, a comparatively small figure in relation to the shock tariffs are delivering. 

To that end, even if manufacturing jobs did come back to the U.S. en masse, there is no reason to think it would benefit the economy the way Trump hopes. 

For example, top Wall Street tech analyst Dan Ives projects that shifting iPhone production to the U.S. would inflate prices by 250%, pushing a $1,000 device to approximately $2,500.

In that same vein, if countries retaliate with their own tariffs — as France and Canada are already vowing to do — American cars and agricultural products will be shut out of foreign markets. 

It is hard to see how Trump’s voters in Michigan and those in rural areas will benefit from such a trade war, a sizable risk for Republicans ahead of next year’s midterms. 

Similarly, if tariffs slow down global trade and bring about a recession, Republicans will almost certainly lose the House of Representatives and possibly the Senate next year.

Even before the tariffs were announced, a survey from Marquette University showed that a strong majority (58%) of Americans believe tariffs hurt the U.S. economy, while just 28% said they’re a benefit.

Notably, Republican senators are showing their concern. 

GOP Senator Thom Tillis said, “Anyone who says there may be a little bit of pain before we get things right need to talk to my farmers who are one crop away from bankruptcy.”

And Republican Sen. Chuck Grassley co-sponsored bipartisan legislation to give Congress more power over instituting tariffs, indicating some discontent on the Hill.

That being said, tariffs can be effective — if they are applied precisely rather than wholesale. 

In 2018, Trump imposed 25% tariffs on imported steel, which were effective at revitalizing America’s steel industry and were even adopted — then enhanced — by the Biden administration.

Those tariffs led to nearly $16 billion in new investment into American steel companies, creating more than 3,000 jobs.

And yet, the major difference between then and now however, is that the 2018 tariffs impacted less than 1% of U.S. demand, per the American Iron and Steel Institute. 

Comparatively, the tariffs announced on Wednesday cover virtually every single imported good — in 2024, the U.S. imported more than $4 trillion worth of goods.

To be clear, this is not to say that Trump is wrong to try and forge new trade deals and bring jobs back to the U.S. Many of our current deals are genuinely unfair and have allowed other countries to benefit at our expense. 

Rather, it is to say that the better way to address trade imbalances would be through precise tariffs or signaling a willingness to roll them back in exchange for negotiations, not indiscriminate ones that alienate our allies and may severely damage the economy for little to no gain.

Douglas Schoen is a longtime Democratic political consultant. Saul Mangel is vice president of Schoen Cooperman Research.