It’s been hard to keep track of the economy this week. When tariffs kicked in the stock market dropped, then it soared as President Donald Trump announced tariff pauses, then it dropped again and by the end of the week it was up.
Even experts are dizzy amid the rapid changes.
“These moves are highly unorthodox we should say, pretty extreme, unprecedented,” said Colin Grabow, an expert from the Cato Institute libertarian think tank, in an interview this week with WWL’s Tommy Tucker. “So yeah, these are either going to play out one of two ways: either he [Trump] sees something everyone else doesn’t, or this is going to go very badly… and right now I’m leaning towards the badly option.”
Here’s a refresher on the tariff roller coaster ride we have been on since January. Trump first announced tariffs on some of the U.S.’s biggest trade partners – China, Canada and Mexico. He paused some of those tariffs but then let them kick in again. Then, he announced plans for “reciprocal” tariffs determined based on trade deficits with other countries around the world.
Trump announced that the reciprocal tariffs would kick in this month on “Liberation Day” and then quickly paused the tariffs for a 90-day period on countries that did not retaliate. However, he kept high tariffs on China in place. As we mentioned, those tariff starts and stops corresponded with volatility in the stock market this week.
“It’s hard to keep up,” Grabow said. “Things change on almost a day-to-day, hour-by-hour basis.”
While the stock market has already been rocked by the tariffs, the impact to American consumers is expected to show up sometime in the future. That’s because many U.S. businesses rely on Chinese production to keep their costs low.
“Just yesterday, I talked to the CEO of a small business, and he imports lots of parts and components for bicycles that he makes, and he says: “Look you know, there’s only a couple countries in the world I can get this done in,’” Grabow said.
He added that the business owner is willing to relocate production, but that the process would take time. Willy Shih, professor of management practice at Harvard Business School, also spoke to Tucker this week about how feasible Trump’s goal to bring more manufacturing jobs to the U.S. is.
Grabow told Tucker that existing inventory factors in to when Americans might see consumer goods increase due to the tariffs. Until companies have to place a new order impacted by the tariffs, prices might stay stable.
Once those orders are in, U.S. companies will have to pay higher prices to bring in goods. That means that they are likely to pass those costs along to consumers in the form of higher prices, or those businesses could “eat” the costs. Grabow expects a combination of both.
As for whether the tariffs will put the U.S. on a path to a brighter economic future like the president has promised, the Cato Institute expert isn’t convinced.
“I’m quite skeptical of this argument,” he said. “I don’t think that we’re going to essentially tax ourselves into prosperity. I don’t think making it more difficult for Americans to trade and do business with other people… is conducive to a strong economy or to our prosperity.”
MarketWatch did report Friday that the stock market was up again at the end of a wild week. It said that traders were still weighing inflation data and addressing tariff uncertainty.