President Trump imposed an unprecedented, universal 10% tariff baseline on all U.S. imports on April 2. The move was a ubiquitous barrier that has the potential to undermine the present state of global trading relations and de-stabilize both international and domestic economies. Coining the date as “Liberation Day,” President Trump’s trust in the experimental tariffs is nevertheless unwavering, even as financial entities and in-field professionals anticipate a grim future for the United States.

Elizabeth Schmitt, a professor of economics at SUNY Oswego with expertise in macroeconomic theory, is just one of the countless academics who has analyzed the economic situation and reiterates the potential for more harm to arise from these tariffs than good.

“Tariffs are a tax on imports,” Schmitt said. “They are an example of a barrier to trade. Economists, as a whole, are not supportive of trade barriers – we think the benefits of trade, as a whole, outweigh the costs to some groups.”

“Tariffs, like many taxes, are distortionary. In other words, they push the decisions of economic agents away from the most efficient ones. There is a reason that trade is global – different countries have comparative advantages in the production of goods. By specializing in what they produce best and trading, we get the most out of our resources; tariffs get in the way of this.”

President Trump’s incentive behind the instatement of these controversial tariffs blossoms from an anxious perspective on the United States’ contemporary trade deficit. A trade deficit occurs when a nation exports (goods sold to international markets) less than it imports (goods purchased from abroad) in terms of monetary value. In a more generalized context, a trade deficit is an imbalance in trade; similar to a deficit is a trade surplus, a vice-versa scenario where there are more exports from a nation than imports to it. Defining his first presidential term with the 2018 Chinese “trade war” – motivated by concerns regarding “extreme trade disparities” – it is thus no surprise that the ongoing deficit is at the forefront of the administration’s interest to tackle.

It is critical to note that the 10% levied tax is not absolute for any nation. Per the White House in an April 2 statement, American rivals, or nations who simply “exacerbated” the present imbalance, such as China, would be struck with much greater percentages.

“President Trump will impose an individualized reciprocal higher tariff on the countries with which the United States has the largest trade deficits… These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying unreciprocal treatment is satisfied, resolved, or mitigated.”

Though viewing trade deficits as a negative has been popularized through the rhetoric of politicians such as President Trump, the presence of one is not entirely indicative of a subpar economy. In their 1996 research paper, David M. Gould (senior economist and policy advisor for the Federal Reserve Bank of Dallas [FRBD]) and Roy J. Ruffin (research associate for FRBD and economics professor at the University of Houston) note that “trade deficits or surpluses are merely a reflection of a country’s international borrowing or lending profile over time.”

“Far too often, the common wisdom is that large trade deficits signal a fundamentally weak economy, when the empirical evidence suggests that there is no long-run relationship between the two. Trade deficits and surpluses are a part of the efficient allocation of economic resources and international risk-sharing that is critical to the long-run health of the world economy.”

Though more than two decades have elapsed since their publication, Gould and Ruffin’s research remains a robust and reliable model in the era of globalization. Trade deficits are not inherent signs of faltering economic strength; rather, they are byproducts of international sales and purchases. Unfortunately, this concept was eclipsed by the prioritization of America’s positioning on the global stage and whether or not its economy triumphed over others.

“In my opinion, this action [of implementing tariffs] will diminish U.S. economic hegemony,” Schmitt said. “Other countries are already moving to form trade alliances without us [such as] China, Japan [and] South Korea. The U.S. is now seen as an unreliable economic and military ally, and the rest of the world will seek to build their future without us.”

“This is a sudden, hostile act. We are seen as the bully. No one likes a bully.”

Though “tariffs are a net negative,” according to Schmitt, some benefits emerge within the nation implementing the tariffs by insulating home industries from international competition.

“Tariffs can protect domestic jobs in industries that compete with imports,” Schmitt said. “Tariffs can temporarily protect a new industry until it competes on its own, raise revenue (although by depressing economy activity, [hurting] overall tax revenue), offset unfair trade and labor practices in other countries, or punish countries for human rights abuses and violation of international laws. Tariffs, by favoring domestic producers, preserve industrial capacity in strategic goods, [including] steel [and] computer chips.”

In the Central New York Region, companies such as Micron (set to establish itself in Syracuse) should theoretically benefit from tariffs by making computer chips and semiconductors produced in the United States cheaper and more attractive to consumers. In addition, individuals hired from the surrounding metropolitan area (which is typically viewed as a Rust Belt city) should profit as employees. However, since additional components (memory modules, SSDs) that are used to create entire products are shipped from Micron’s abroad manufacturing plants located in China, Taiwan and Japan, net prices are still anticipated to rise, ultimately placing consumers at a significant disadvantage.

“Tariffs will raise prices for consumers,” Schmitt said. “Imported food, clothing, electronics, and the price of materials, [including] lumber, steel, etcetera… The higher prices for consumers outweigh the value of jobs saved, or industry profits.”

The term “consumer” refers to anyone participating in an economy. Consumers could be out-of-college employees purchasing gas for their car ride to work, parents purchasing clothes for their children, or students purchasing school supplies or food. These individuals are directly affected by the state of the economy, and the recent tariffs will inevitably influence their purchasing power; the magnitude of that influence, however, is currently uncertain.

Given the suddenness with which these universal and targeted tariffs were implemented, it is difficult to gauge to what extent these levied taxes are going to have on the domestic economy in the long run. Nonetheless, other nations have quickly responded to the United States, and a majority of them are not seeking to negotiate as President Trump hoped.

“China already retaliated with their tariffs,” Schmitt said. “Other countries always retaliate. As a result of this retaliation, our exports decline, and GDP falls. Unemployment rises, particularly in industries that export. This will be disastrous for farmers, [as] U.S. farmers export about 50% of their wheat and soybeans, for example.”

In a Nov. 2024 document published by the New York State’s Office of the Comptroller titled “A Profile of Agriculture in New York State,” a 2022 evaluation of the Central New York Region found that 1.1 billion dollars in sales were generated by the agricultural sector, with Cayuga County having the highest total sales in the entire state. This feat was accomplished even with a 10% reduction in the number of farms in the region, amplifying the importance of agriculture for the state’s economy. In this case, tariffs would inevitably harm farmers by inhibiting their ability to export their crops abroad, compromising the economic growth of this particular market and the livelihoods of everyday citizens already struggling against a constraining number of operating farmlands.

President Trump’s decision to impose tariffs against all nations – in a desperate effort to establish worldwide dominance – is on track to be categorically disastrous for the nation, as very little optimism exists amongst professionals who have dissected the pending consequences.

“There are really good reasons why profit-maximizing firms have moved or established production in various places in the world,” Schmitt said. “Tariffs push decisions away from that. Even if manufacturing returns to the U.S., it will still be more costly. Even more serious is the damage done to the U.S. as the world leader. We have lost the trust of much of the world, and it will not be easy to get it back. The economic fallout is huge.”

“JPMorgan, Goldman Sachs, and others have all raised their subjective probability of recession,” Schmitt said.

In a short-term context, repercussions for the United States have been hypothesized but not yet materialized. Even if tariffs are capable of being detrimental to the lives of typical American consumers, there still exists a window of opportunity for the government to revert or, at the very least, reduce the blanketing scope of the 10% tariff. However, this window is quickly slamming shut, given equally rapid international responses. Without haste, the Trump administration will surely catch its fingers on the sill.

“I am hopeful that the Trump administration will be pressured to back off,” Schmitt said. “I am hoping that future elections will put leaders in place with a better understanding of economics and global cooperation. It is not a zero-sum game. Global economic cooperation can be a win for all. But these trade barriers are incredibly short-sighted and can easily lead to a declining standard of living for Americans.”

Photo by: WhiteHouse.gov