Quick Take
It would take someone who managed to repeatedly bankrupt casinos (!) to posses the malignant stupidity to launch a trade war with nonsensical tariffs (taxes) that may drive the U.S. economy, which was praised five months ago in an Economist cover story as the “envy of the world,” into recession, along with the rest of the world.
History will add this to Trump’s outrageous attacks on American democracy, his absurd hostility to our closest international friends, his dangerous cozying up to Russia, his selfish cancellation of global humanitarian initiatives, his risky threats to domestic and global heath, his foolish attacks on American universities, his hazardous assault on domestic and international climate change policy, and so very much more.
America is increasingly isolated under Trump policies, all to the detriment of American families’ pocketbooks.
When allies Japan and Korea work in common cause with China to respond to Trump tariffs, it’s advantage China and further hurts every family’s budget.
China is still staying cautious even in the midst of some of the highest tariffs imposed on it in modern U.S.-China history. Beijing has initially complained that the new tariffs break World Trade Organization (WTO) rules, a tactic that is unlikely to soften the hearts of the U.S. administration, which is not greatly concerned with the WTO.
Beijing is likely working out what to do next and in particular, trying to work out if it can find partners elsewhere in pushing back – for instance, opening conversations with the EU and Germany in particular, and looking to persuade members of its Regional Comprehensive Economic Partnership trade group that they should lean into trade with China.
Overall, it is still not clear how the U.S.’s security priorities in East Asia are compatible with the major, budget-damaging tariffs imposed on Japan and South Korea. Statements from Tokyo and Seoul are likely to express bewilderment as they try and work out where to go next.
The Trump tariffs will raise prices and reduce real incomes, more-or-less permanently. Tariffs in general don’t necessarily have to lead to recession. But in this case, there is a big danger of it -- especially to the extent that our trading partners retaliate, which they will.
It is as if Trump is doing all he can to maximize the chaos and uncertainty around his trade policy. We get threat, announcement, postponement, revision, postponement again, enactment, retraction… Given the extraordinary uncertainty, firms are postponing decisions whether to hire workers and whether to invest in plant and equipment. (There is also chaos around federal spending cuts, seemingly maximizing the damage per dollar cut.) The uncertainty has shown up over the last two months in the falling stock market and falling consumer and business confidence. It hasn’t yet shown up in such direct measures of economic activity as job creation, industrial production, or real incomes. But it will.
And then there is the long-term damage that all this is doing to US Government credibility, reputation, good will, alliances, rule of law domestically, international agreements, and global leadership.
The extraordinary achievement of a transatlantic economy of trade in goods and services of $2 trillion annually and sales by affiliates of both sides of $7 trillion, giving employment to some 16 million people, took some 80 years of creating international institutions, establishing norms, and negotiating trade agreements under American leadership.
This accomplishment will be undermined by President Trump with one reckless act. American policy has helped to make the transatlantic area the most economically integrated region in the world, underpinning a highly successful American-led security relationship through NATO that preserved peace for more than 75 years.
Trump’s economic wrecking action sadly flanks his equally destructive move to withdraw from America’s security commitments to Europe in NATO and his growing alignment with an aggressive Russia.
At first glance, local governments may seem far removed from the turbulence of international trade, given that municipalities neither import nor export much. Yet their finances are not immune. The impact filters through in two key ways.
First, on the revenue side, state and local governments rely heavily on taxes from businesses—shops, restaurants, and small manufacturers—many of which depend on imported raw materials. When tariffs drive up costs, businesses must decide whether to raise prices, cut expenses, or absorb the hit. They also face uncertainty over how long tariffs will last. A restaurateur, for example, may hesitate to pay 30% more for Italian wine if prices could drop next week. This uncertainty leads to reduced spending, lower sales tax revenue, and ultimately, tighter state budgets. In Massachusetts, for instance, sales tax generates a quarter of the state's revenue, while corporate and business taxes contribute another 10%. A slowdown in business activity directly weakens the state’s ability to fund essential programs.
Second, while personnel costs dominate state and local spending, these governments also fund major capital projects such as road and bridge repairs—many of which require imported materials like steel. As tariffs drive up construction costs, infrastructure projects become more expensive, straining budgets. This may prevent or delay critical infrastructure maintenance as well as new construction. Even essential services may feel the impact. For example, tariffs on imported foods like avocados could raise costs for school meal programs.
Though tariffs may not be the most obvious threat to state and local budgets, their effects will be felt quickly, creating economic headwinds for small businesses, downtown centers, and local communities. Many of these places were hit hard by the pandemic. The tariffs will be another blow.
While most discussions of tariffs focus on their political or economic impact, we should also consider their effects on public health. The toll of reduced control and predictability in the workplace—such as not knowing whether you’ll lose your job, your income, or your retirement savings—is not abstract; it shows up in the body. Research at the interface of psychological science and medicine has consistently shown that when workers face prolonged uncertainty and lack control over the future, stress levels rise and physiological wear and tear accelerates, particularly in the cardiovascular system. Given that heart disease is the leading cause of death in the U.S., the link between economic anxiety and heart health deserves far more attention.
The Trump administration has emphasized its commitment to protecting American families. With that in mind, this is an opportunity to consider not only economic outcomes but also the health consequences of prolonged uncertainty and risk of recession. Predictability and stability aren’t just economic goals—they’re public health necessities. Offering that sense of security sooner rather than later could strengthen both our economy and our collective well-being.