It has been a little over 2 weeks since ‘liberation day’, when Trump unveiled sweeping tariffs against many countries. I wrote a 3-part series about this (here, here, and here) in which I predicted the tariffs would not be as bad as forecasted.
My position has also always been that the tariffs were an unforced error. Stocks were at record highs even as recently as February 2025, after he was inaugurated. He inherited an economy that was recovering from the stagflation of 2022-2023. Had Trump instead continued to hammer the anti-woke/anti-DEI message, he would enjoy even more support by getting centrists and Democrats on his side, whereas now he has alienated everyone but his staunchest base. The tariff-induced bear market and possible recession feeds perfectly into the left-wing narrative of Trump being bad for the economy.
However, the ‘Milton Friedman people’, with their toy models of how the tariffs represent an inefficiency, have an overly reductive or simplistic view of the US economy. Same for the left, who have predicted runaway inflation and other crisis. I am much more agnostic or optimistic about the matter, predicting that not much will happen. This is not to say tariffs are good, which they aren’t (I agree with the critics that the tariffs will not lead to meaningful job creation or increase in domestic manufacturing), but both sides underestimate the adaptability and flexibility of the US economy and the nuances.
There are endless headlines about the untold inflation that is imminent:
It has been 2 weeks now, so where is the hyperinflation that was promised? It reminds me of the hype about Covid and predictions about ‘bodies piled up in the streets’ and the healthcare system collapsing. People were scared into compliance. Few stepped back to actually ask if any of this panic was actually justified or to assess the situation critically. Facebook/Meta and other social networks closed people’s accounts merely for questioning the “official narrative” even if said narrative was constantly changing.
By mid-April 2020, as stocks were collapsing and the world felt like it was on the precipice of another Bubonic Plague, data from California prisons showed a drastically downgraded infection fatality rate, from as high as 1% originally forecasted, to only a tenth of a percent for healthy middle-aged adults, due to the huge presence of asymptomatic infected individuals. Here is the exact story, from April 25th…I remember it like it was yesterday, because the market bottomed and recovered at that point. From that point onward, stocks surged. ‘We’ were right that Covid was not nearly as deadly as originally predicted, and that the media was wrong. Thousands of businesses were forcibly closed and people forced to lockdown over what amounted to a bad flu season.
Trump’s tariffs represent only a tiny fraction of the inputs of the US economy. The US economy is so big and dynamic that tariffs will not have much of an impact. This is why, two weeks later, inflation has not gone up much, if it ever does at all. Consider a $5 cup of coffee from Starbucks or an overpriced Chipotle burrito bowl. The majority of the sticker price is for labor and advertising. The actual raw goods such as the beans, which are imported, is a tiny percentage of this. An increasingly large share of the US economy is services; imported electronics is a small fraction.
As for drop-shippers or other small businesses struggling, this is why I have long argued that the best way to make money is with white-collar work (the college-to-career route) or investing. There is a reason people go into debt for those degrees; they are not stupid, but that white-collar work is much more impervious to macro factors and consistent pay compared to small business or e-biz. Many of the same people who scoffed or ridiculed college grads about debt or ‘useless degrees’ are now whining about inflation hurting their businesses.
Whether it’s 2008, 2020, or now tariffs, small business always bears the brunt of economic instability, uncertainty, and policy, whereas white-collar work is much more resilient. Self-employed work is not safer than salaried work, only that it shifts the risk. Rather than being fired, it’s being in the crosshairs of economic crisis and uncertainty. White collar jobs were the last to be downsized in 2008 and 2020, compared to construction workers during the ’08 crisis, or restaurant workers during Covid.
Trump or his other staff does not care if your business is struggling due to tariffs, similar the same ‘policy experts’ and politicians on the left who oversaw the shutdown of businesses during Covid (at least there were PPP loans, but do not expect similar assistance regarding tariffs).