There Is No Method to Trump’s Madness-Driven Trade War

Trump’s insistence on using the presidency as an economic bully pulpit is peaking into pure insanity this week as he rolls out a cascade of new tariffs on just about every country under the sun. The tidy chart released masked the rambling, incoherent trade policy that ranged from charging 47 percent on goods imported from Vietnam to levying a tariff against two islands in the Falklands inhabited only by penguins.

Claims by the White House that these are “reciprocal” tariffs are ludicrous. As economic journalist James Surowiecki pointed out, the seemingly random tariff rates appear to be based on an embarrassingly infantile formula of taking a countries’ trade surpluses with the U.S. divided by their export value and then dividing that by half. There did not seem to be any effort to account for goods the U.S. can not produce domestically.

The stock market, driven by an investor class that stuck its head in the sand on Trump’s tariff threats, is finally reckoning with the terrible cost of MAGA incompetence and their own catastrophically misguided reassurances. Financial indexes plunged anywhere from 3 to 5 percent in the first 24 hours after Trump’s tariff tantrum and are still falling. Most of the country seemed in shock, grappling with the bleak financial forecast cast by the shadow of a tyrant intent on undermining an economy that The Economist referred to as “the envy of the world” as recently as October 2024.

There are some signs Tariff Man might finally have spent all his political capital as Republican senators, led by Mitch McConnell and Rand Paul, moved to join Democrats and take back the power of the purse from this torrent of presidential abuse. But sadly, this effort is almost certainly doomed to failure. Bipartisan legislation currently being considered in the Senate is likely to die a quick death in the House of Republican sycophants because weeks ago, Speaker Mike Johnson blocked all future votes to end the emergency declaration that provides justification for tariffs.

In the last two months Trump’s tariffs have been more bark than bite, quickly blowing over as he bluffed his way through at the first sign of pushback. This time around, Tariff Man hasn’t left himself much of an off-ramp to save face. Increasingly, it looks like Americans will have to figure out how to weather the financial storm he started, at least in the short term.

Where and When Trump’s Tariffs Will Hit the Hardest

Because these tariffs are so wide-ranging, they are likely to affect almost everything the average American buys on a daily basis with few exceptions. Oil, lumber, and pharmaceuticals are notably exempt from current tariffs, which is fortunate given the vast majority of generic drugs are manufactured in India and China.

However some industries will be harder hit due to our national reliance on imported goods and this will nudge prices higher even for American-made substitutes. This includes cars, electronics, furniture, clothing, wine and some spirits, and even coffee and chocolate. If you thought Hawaii’s Kona coffee, one of the few places America grows coffee domestically, was expensive before, you’re in for some real sticker shock.

For the 25 percent universal tariff on auto imports, you’re likely to see tariff prices hit almost immediately. And in case no one has mentioned this yet, auto import tariffs will also raise car insurance rates which have already increased 20 percent in the last year alone. Although lumber is currently exempt from tariffs, home insurance also could see increases tied to other building costs.

The rest of the tariffs announced are set to take effect Wednesday, April 9. Some prices should stay static until the shelves empty and warehouses clear, but consumer stockpiling could dramatically accelerate that. You’d be likely to see tariff prices hit fresh produce and other foods first, followed by shelf-stable food and then popular consumables.

Depending on how long this trade war persists, tariffs could cost the American people trillions and take a huge cut out of the average working-class income. Estimates for the cost of Trump’s tariff war are about $5,000 per year in additional costs for each American household.

Absent in the discussion of the bottom line cost of these tariffs is the damage retaliatory tariffs can wield as the European Union and other countries vow to stand together in the face of American aggression. Canada has already demonstrated the outsize effect a targeted boycott of American goods can have on specific American industries such as stateside distilleries and U.S. travel.

What History Can Teach Us About Tariffs

Historically, tariffs are an old-school and rather simplistic solution to creating federal revenue. America made extensive use of tariffs in trade policy until the early 1900s when free trade and a bustling economy paved the way towards a more effective source of government funding—income tax. The very income tax revenue that DOGE’s deep cuts into the IRS workforce threaten to undermine.

Trump has consistently characterized tariffs as a source of sovereign wealth that will create an economic boom, but history suggests they more often lead to bust. The 1890 McKinley tariff was followed by a 1893 depression where the economy contracted 10 percent and the unemployment rate was just shy of 20 percent. And despite what Tariff Man tries to tell you, the Great Depression in the U.S. is widely considered to have been accelerated by the 1930 Smoot-Hawley tariff law.

Even the more recent history of tariffs is a cautionary tale. Protectionist policies have decimated some American sectors, making it too costly or too difficult to keep up with demand for products like baby formula or pickup trucks. Take for instance washing machines, where the effect of Trump tariffs is easy to measure. Costs for laundry appliances increased dramatically under tariffs while adding a tiny fraction of the manufacturing jobs promised. Americans are likely to see that same phenomena writ large in the coming months.

What Happens If Trump’s Preposterous Trade War Persists

So what happens next? Honestly, the only thing that can be guaranteed with Trump in charge is maximum chaos. It’s likely some smaller countries will seek to strike conciliatory deals with a president-turned-mobster shaking them down. Other countries, notably the European Union and Asia, have already announced they will band together to announce retaliatory measures.

In the past tariffs have seemed like a game of chicken where Trump is the coward who ducks first. But this time around, the immense magnitude of the blustering and bullying is going to be hard to hide or walk back. As the trade war drags on, we’ll likely watch a once strong economy slump in real time as stagflation sets in.

And it’s certainly worth considering that what happens in America doesn’t stay in America. If the world’s strongest economy falters and flails its way into recession, it’s likely to drag the world with it. In a worst-case scenario, severe stress on the U.S. dollar could eventually lead to another depression and even default on the national debt.

How to Protect Your Finances From Tariff Fallout

While you may feel powerless in the face of this national financial crisis, there are some things you can control. Like how you spend (and save) your own money. Take action today if you haven’t already and draft a financial emergency plan. Below are a few things it should cover.

Step 1: Tighten your budget
Slash expenses ruthlessly. Start making contingency plans for losing critical stuff like healthcare coverage and housing assistance. If everything costs 25 percent more, figure out where that extra financial bandwidth comes from.

Step 2: Get a side gig or generate more income
There are two ways to have more money: Make more or spend less money. If you don’t already have one, start digging around for a side hustle to fill income gaps or find things of value around the house you can sell in a pinch.

Step 3: Save, save, save
For the most part, it’s already too late to start stockpiling or making big purchases. Instead, focus on saving as much as you can. Building up an emergency fund of three to six months of living expenses is ideal, but something is better than nothing so don’t be afraid to start small. Your tax refund can be a good way to give your savings a kickstart.

Step 4: Protect your retirement
If your retirement is locked into the stock market, you don’t need to pull all your money out yet. Although the trillions being lost daily due to Trump’s tariffs may make looking at your 401(k) or IRA balance painful.

But do start reducing your risk now. Invest in lower-risk mutual funds and pull any money you’ll need in the next five years out of the market and into a high-yield savings or money market account.

Step 5: Grow your own food
If you have the ability and the space, grow as much of your own food as you can or join a community garden. No space even for container gardening? You can still shop food cooperatives or subscribe to CSA shares from a local farm.

Fortunately spring is coming, but start those seedlings and get them in the ground soon so your wallet can reap the benefits all summer long and well into the fall.

Step 6: Buy secondhand
You may already be shopping for clothes secondhand, but for big purchases, consider buying refurbished/used appliances, furniture, cars, and the like. Remember that rising prices and demand for secondhand goods means it’s a good time to sell your used stuff as well.

Step 7: Bank locally
Make sure your money is accessible to you in a local bank or credit union with a physical branch nearby. And keep some cash (maybe as much as a month’s worth of expenses) in a fireproof safe. We still have an FDIC at the moment to insure bank deposits but if things get dicey and there’s political unrest, you’ll appreciate having some cash on hand.

You can read more about how to protect your finances from American fascism and Trump’s incompetence here.