Adam (00:00):
Hey everyone, welcome back to “Simplifying the State”. I’m Adam Watson.

Nicholas (00:05):
And I’m Nicholas Parrin.

Adam (00:07):
This episode is going to be similar to our one about the Trump-Zelensky meeting — more of an opinion piece in podcast form. Today, we’re diving into the recent tariffs announced by the Trump administration.

So, yesterday — April 2, Trump officially imposed a bunch of tariffs he had previously delayed. That includes the so-called “reciprocal tariffs” and a universal 10% tariff on all imports. Yes, that includes countries like the UK, Japan, France… and apparently, Antarctica? Not sure what exports we’re getting from there, but hey, we’re taxing penguin fish or something.

Basically, we’ve just alienated every major trading partner. And markets? They didn’t take it well. It was the worst day for stocks since 2022. Crude oil is down 0.55%, the Dow dropped 3.9%, NASDAQ 5.9%, S&P 500 5.8%, and the Russell 2000 fell 6.5%. The Dow lost 1,679 points in a single day — the worst since early COVID. So, Nicholas, is the golden age of American economics finally upon us?

Nicholas (02:25):
Well, based on those numbers? Definitely not. These tariffs are meant to be a long-term strategy to revitalize U.S. industry. But it’s questionable whether the economic losses we’ll take now — like GDP drops and stock market slumps — will be worth any future manufacturing boom.

Adam (03:01):
Yeah, I get why he’s doing it — to boost American manufacturing. That’s a solid goal. But tariffs alone can’t do that. They’re one tool, and they’re usually used to protect industries that already exist — not to start new ones.

Take Biden’s tariffs on Chinese EVs — those were targeted to help the U.S. electric vehicle industry. Trump’s approach is broad and blunt. You can’t just slap tariffs on everything and expect factories to spring up overnight.

It’s not just about sticks — you need carrots too. That’s what the CHIPS Act was. Billions in tax breaks and incentives to bring semiconductor manufacturing back to the U.S. You can’t just punish companies for outsourcing — you need to give them a reason to come back.

Nicholas (04:32):
Exactly. And let’s not forget, even if this works, manufacturing takes time. People have to be trained, factories built or repurposed. Plus, America’s economy has been shifting toward services for nearly a century. Our population has grown wealthier, and with that comes a higher demand for services over goods — especially domestically made goods. Offshoring hasn’t helped, but this is more a structural shift than just a manufacturing decline.

Adam (05:45):
Right. And about the “short-term hardship” the administration mentioned — the average American household is expected to pay about $2,100 more per year because of these tariffs.

Let’s be clear: a tariff is a tax on imports. Say something costs $100 — with a 10% tariff, that becomes $110. Companies can either eat the cost or pass it on to consumers. And let’s be real — most are going to pass it on. Corporations don’t like shrinking profit margins.

Nicholas (07:16):
Totally. Companies aren’t going to just stop selling to the U.S. They’ll stay and raise prices to maintain profits — it’s the only logical move. Consumers will foot the bill.

Adam (07:49):
And it’s not just fully imported goods. Even American-made products rely on global supply chains. Take a Ford F-150 — assembled in the U.S., sure, but the tires might come from South Korea, transmission parts from Canada and Mexico, and engine components from multiple countries. Even the steel and aluminum come from Canada, which are now also subject to tariffs.

Goldman Sachs estimates the price of foreign-made cars — including those made in Canada and Mexico — could jump by $5,000 to $15,000. That hits a lot of U.S. consumers.

Nicholas (10:01):
One thing that stood out to me is how Trump’s team calculated these tariffs. For example, with Liechtenstein, they say the country has a 73% tariff on the U.S., so Trump retaliates with 37%. But that 73% number seems to come from dividing the trade deficit by the value of imports, which isn’t how tariffs actually work. It’s a weird and kind of meaningless math.

Adam (12:23):
Yeah, I was looking at the chart. It seems like they just halved whatever tariff another country has on us — unless it was already 10%, then we matched it. Like South Korea charges 50%, so we charge them 25. Bangladesh charges 74%, so we give them 37%. That seems to be the logic.

Nicholas (14:37):
And historically, this hasn’t worked well. The last time we imposed sweeping tariffs — during the early 1930s — it made the Great Depression worse. Tariffs didn’t cause the Depression, but they certainly deepened it.

Adam (15:14):
Yeah. Tariffs should be precise, not a blunt instrument. This feels more like a sledgehammer to the global trading system. Plus, for it to have any long-term effect, these tariffs would need to stay in place for years — at least beyond Trump’s current term.

If a Democrat wins in 2028, they’d likely roll this all back. Even some Republicans like Rand Paul are against tariffs. So, unless Trump’s successor keeps the policy intact, the short-term pain might not lead to any long-term gain.

Nicholas (17:19):
And like I said earlier, part of why U.S. manufacturing has declined is because we’re wealthy. Other wealthy countries — like Norway — also have shrinking manufacturing sectors. But they’re not slapping tariffs on everyone. So… why are we?

Adam (18:06):
Companies go where it’s cheapest. Right now, that’s not the U.S. Maybe these tariffs change that — but again, you need incentives. Just punishing companies isn’t going to bring them back.

Nicholas (18:35):
It’ll definitely hurt U.S. consumers in the short term.

Adam (18:38):
Yeah, definitely. I’m not sure it’ll cause long-term inflation, though. I saw something that said before the tariffs were announced, inflation was expected to drop to around 2.1–2.5% by the end of the year. Now, assuming every tariff is implemented to the max, it could push that number up by as much as 2 percentage points.

So yeah, that’s not good. And it’s not just the cost of goods that’ll rise—services are going to be hit too. Take hospitals, for example. If they rely on imported medical equipment, and that equipment isn’t made in the U.S., those costs are going to spike. That means higher hospital bills. Same goes for restaurants—if they’re importing ingredients that aren’t grown domestically, food service prices could go up too. It all adds up.

Nicholas (19:56):
And that, in turn, might push insurance companies into even hotter water. They might start cutting coverage or denying more claims.

Adam (20:08):
Right. Home insurance is going to get more expensive—tariffs on things like wood, metal, and other building materials mean it’ll cost more to rebuild after a storm. Same with auto insurance. Pretty much all types of insurance could go up.

So now you’ve got rising prices for goods, services, and insurance—basically every aspect of daily life. And we’re doing all this to achieve a goal that might not even be met. Honestly, the whole thing just feels… kind of stupid.

Nicholas (20:58):
Absolutely.

Adam (21:00):
Thanks for tuning in to Simplifying the State. We’ll be back next week, diving into another topic the way we always do. See you then.