Trump’s tariff vision threatens economic upheaval amid internal contradictions

US President Donald Trump - File Photo

President Donald Trump's attempt to transform the US economy into a high-tariff manufacturing giant is being undercut by his own unpredictability and contradictions, causing companies to hold back on investing in his vision, the Washington Post reported.

Trump's broad new import tariffs, unveiled in early April, were promoted as the start of a "Golden Age of Global Trade," intended to return jobs and factories to US soil. But businesses are not sure if the tariffs are a negotiating ploy or here to stay, as the administration sends confusing signals.

An expensive economic prescription

The president likened the tariffs to bitter "medicine" the economy has to go through. On April 5, he levied a 10-point tariff hike across the board, raising the US average to its highest level in more than 80 years. Analysts say this action may become permanent, putting pressure on consumer prices and eliciting retaliation.

"The course of action here has been unequivocal," Eric Winograd, a director at AllianceBernstein, said, adding he thinks Trump is committed to restructuring trade.

Ambiguity dampens investment

Executives contemplating reshoring production must overcome massive barriers: reconstructing plants, buying machinery, and staffing in a constrained labour market. Trump's sole decision-making tariff increases—announced through emergency authority instead of legislation—and his changing language confuse executives trying to plan.

Economist Jason Furman cautioned that even best-case scenarios now involve tariff rates on par with those of nations such as Iran and Venezuela. In addition, the administration's immigration crackdown could further shrink the pool of low-skilled workers available for revived manufacturing.

Winners, losers and long-term risks

A few domestic industries, such as the auto industry, could gain in the short run. Current American factories have slack capacity, and this could support a modest increase in production. But newer plants use fewer people because of automation, constraining the job gains Trump has been touting.

Meanwhile, consumers and businesses are dealing with higher prices and scarce products. Numerous products—bananas as well as microchips—are either more expensive to create domestically or simply can't be produced in America at all.

Volatile guidance and mixed goals

Administration officials have not reached the final vision. Trade adviser Peter Navarro said in a Financial Times op-ed that the tariffs were "not a negotiation," as Trump tossed out deals with

nations such as Japan. These inconsistencies have rattled investors and spiked market volatility, with the VIX index at its highest level since the pandemic.

A recent AP-NORC poll discovered that 60% of Americans disapprove of Trump's trade handling, and even some congressional Republicans are calling on him to go back to the negotiating table.

Prospects remain murky

Trump's unilateral action, although quicker to put in place, permits subsequent presidents to eliminate the tariffs equally as easily. This political unpredictability tacks on a risk premium to long-term investment planning, says Citibank's chief economist Nathan Sheets.

"We've tossed a big risk premium on future investment," Sheets said. "How do we know another president won't come along with a whole new plan in a few years?"

As the president pushes ahead, economists caution that although his plan may spark limited industrial resurgence, it can also leave the overall US economy functioning less efficiently, at greater expense, with reduced options, and with uncertain payoff.