The Cost of Weaponizing Tariffs

Rio de Janeiro’s port handles about 30% of Brazil’s exports of coffee into the U.S., which totaled roughly $2 billion last year. (Dado Galdieri/Bloomberg)

About the author: Brian P. Klein is the founder of RidgePoint Global, a strategic advisory firm, and a former U.S. diplomat.

After a 90-day reprieve, the tariff war is back with a vengeance. The White House is wielding trade taxes as a blunt weapon with indiscriminate abandon, betting heavily that the rest of the world simply can’t live without the U.S. economy.

Instead of launching a golden age of domestic manufacturing, taxes on U.S. importers and consumers will damage the domestic economy and knock the U.S. out of its global trade leadership role.

No country is being spared by the capriciousness of the White House’s trade tantrums. On Friday, President Donald Trump hit Canada, the second largest U.S. trade partner, with a 35% tariff. He threatened longtime U.S. allies Japan and South Korea, hosts of the largest U.S. military presence in the Pacific, with 25% taxes earlier in the week. If implemented, these tariffs will raise prices on everything from precision machine parts critical for U.S. manufacturers to automobiles. Sixteen of the top twenty-five best selling cars of 2024 in the U.S. were Japanese or Korean.

And then there is the whopping 50% tariff on Brazil, announced by Trump on Wednesday. Part of Trump’s rationale for imposing tariffs is to reduce trade deficits with other countries. But the U.S. had a trade surplus of $7.4 billion with Brazil last year, according to the U.S. trade representative’s office. That surplus was on track to keep growing.

Without an economic rationale for a move like this, Trump instead sent a letter to Brazilian President Luiz Inácio Lula da Silva focusing on Brazil’s treatment of its former president, Jair Bolsonaro, who is a Trump ally. Bolsonaro was charged with an attempted coup after losing Brazil’s 2022 presidential election.

With the tariffs on Brazil, the administration is jeopardizing U.S. imports of steel, machinery, fuels, aircraft, and agricultural products—including its main source of coffee and orange juice—over a political grudge rather than a reasoned assessment of trade priorities.

These and the rest of the tariff increases will make a swath of goods significantly more expensive for U.S. consumers. So far, inflation has been held in check. But as preordered inventory sells off over the summer, higher tariffs will work their way through to retail prices—especially for back to school and holiday shopping.

Damage has already been inflicted on the economy. First quarter gross domestic product growth declined by 0.5%, more than double the prediction of the Commerce Department. While unemployment rates remain somewhat stable, workers are having a harder time finding new jobs and companies are pushing back hiring. Consumers are tightening their spending.

Business leaders are concerned about a recession. Worse still is the very real possibility of stagflation, where prices climb and the economy stagnates. JPMorgan’s Jamie Dimon has been warning about that for more than a year. Digging out of either economic hole will be no easy task.

High housing costs, nearly flat wages, and rising expenses are squeezing a shrinking middle class—the engine of the economy. Tariffs will only make their wallets tighter. And when the middle is missing, business suffers.

But tariffs are also damaging the U.S. abroad. Trade wielded as an economic weapon can fire both ways. Countries can retaliate against Trump’s tariffs that are in contravention to the World Trade Organization and free trade agreements.

U.S. exports will soon face restrictions similar to those it has placed on others. Canada already imposed its own 25% tariff on U.S. alcohol imports and stores emptied their shelves of American brands after Trump’s first round of tariffs. Sales of U.S. wine to Canada, its largest export market, fell 93% in April.

International visitors to the U.S. were down 14% in March versus a year ago. Travel from Canada, Western Europe, Asia, and South America dropped by double digits. Full year losses for 2025 are estimated to be $21 billion. Inbound foreign direct investment in the first quarter of 2025 also dropped by nearly 13% compared with the same quarter a year ago.

What is far harder to quantify is the loss of trust that was built over decades with countries in North America, Europe, and Asia. If there is a sudden economic downturn in the U.S. will Japan, Canada, and China—among the largest foreign buyers of U.S. Treasuries—decide that the insults, disrespect, and wanton disregard for international trade norms aren’t worth the price to invest in the U.S. economy? Will European pharmaceutical companies increase production in a U.S. health crisis if Trump makes good on his threat this week to raise tariffs by 200% “very soon”?

The costs of weaponizing tariffs are steep. Standards of living will decline. There may be higher prices, more limited consumer choices, and a dangerously brittle U.S. economy that has little in the way of goodwill, foreign investment, or diversity of supplies in a time of need.

While the White House keeps betting that the world can’t live without the U.S., they might realize sooner or later that the country can’t prosper without the rest of the world.

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