Trump’s Tariff Gamble Backfires on American Businesses

American businesses are bracing for impact as President Donald Trump prepares for what he calls “liberation day” on Wednesday, when he is expected to announce sweeping reciprocal tariffs on U.S. trading partners. The aggressive trade policy, intended to revitalize American manufacturing, is already backfiring on many companies across the country.

“Some small businesses will shut down [because of tariffs]. I wouldn’t be surprised if it’s 5pc or 10pc. It may be more than that,” warns John Arensmeyer, chief executive of the Small Business Majority, as reported by The Telegraph. With more than 33 million small businesses in America employing 62 million people, even a 5% closure rate could mean millions out of work.

By mid-March, Trump had announced tariffs worth at least $770 billion—seven times what he implemented during his first term, according to investment bank UBS. Reciprocal tariffs could add another $378 billion, bringing the total to $1.1 trillion, equivalent to nearly one-third of the entire UK economy.

Reality on the Ground

While Trump bills tariffs as divine intervention that will help “rediscover the unstoppable power of the American spirit,” the reality for American businesses is quite different. Companies are grappling with rising prices, plunging confidence, and dwindling consumer spending.

Mo Johnson’s company, Better Display Cases, exemplifies the challenges. For a decade, his business imported 8,000 sports memorabilia display cases annually from Shenzhen, China. Since Trump took office, the charges Johnson pays on his imports have surged from 13% to 33%, forcing him to raise prices by 15%.

But instead of moving production to America, as Trump claims will happen, Johnson has shifted operations to Vietnam. “I would love to have my product made in the USA,” Johnson told The Telegraph. “But I cannot get my product in America in the quantities that I want to sell it. I’ve tried numerous places, they’re extremely slow.”

Corporate America Feels the Squeeze

Large corporations are also feeling the pressure. Walmart executives were reportedly grilled by Chinese officials after Bloomberg reported the retail giant was pushing Chinese suppliers for 10% discounts to offset Trump’s tariffs.

Brian Connell, chief executive of Target, warned that Trump’s 25% tariffs on goods from Mexico meant prices would shoot up within days for millions of Americans. William Oplinger, the boss of aluminum producer Alcoa, stated Trump’s steel and aluminum tariffs would be “bad for American workers.”

Even the bosses of America’s big three automakers—Stellantis, Ford, and General Motors—failed to change the president’s mind, as he announced new 25% tariffs on all foreign car imports last week despite their protests.

Economic Warning Signs

The uncertainty rippling through America’s boardrooms has economists revising down their earnings forecasts. Goldman Sachs cut expectations for S&P 500 earnings growth for the year ahead from 9% to 7%, as reported by CNBC.

The Conference Board’s index for consumer expectations for the U.S. economy plunged in March to 65.2 points—the lowest level in 12 years and far below the threshold of 80 that typically signals an impending recession.

Corporate takeovers have also stagnated, down 30% year-on-year and reaching their lowest level in more than a decade, according to Dealogic. The stock market, which Trump often points to as evidence of his success, is also failing him, with the S&P 500 down 5% since his inauguration and the Nasdaq Composite falling by nearly 10%.

Economic Gamble

“This could be a major rewiring of the domestic economy and of the global economy, à la Thatcher, à la Reagan, where you get a more enabled private sector, streamlined government, a fair trading system,” said Mohamed El-Erian, the Allianz chief economic advisor, on CNBC. “Alternatively, if we get tit-for-tat tariffs, we slip into stagflation, and that stagflation becomes well anchored, and that becomes problematic.”

Luke Tilley, chief economist at Wilmington Trust, places the recession risk at 40%. “We were already on the pessimistic side of the spectrum,” he told CNBC. “A lot of that is coming from the fact that we didn’t think the consumer was strong enough heading into the year, and we see growth slowing because of the tariffs.”

Business hesitation was confirmed Tuesday in an Institute for Supply Management survey. “Customers are pausing on new orders as a result of uncertainty regarding tariffs,” said a manager in the transportation equipment industry. “There is no clear direction from the administration on how they will be implemented, so it’s harder to project how they will affect business.”

As Wednesday’s announcement approaches, the fundamental contradiction in Trump’s trade policy remains unresolved: the high cost of labor in America makes it difficult for many products to be competitively manufactured domestically. As Johnson puts it, “Maybe if I tripled my price we could finally bring the resources together to make my product fast enough here. But the question is, who’s going to buy it at triple?”