Assessing the ‘What-Ifs’ of Trump’s Tariffs

The Important Takeaway from Tariff Talk: US Manufacturing is a Focus in Trump’s Second Term.

By Fort’s Editorial Staff

Note: Fort is politically agnostic. Any references to political figures, policies, or events in this article are intended for informational purposes only and do not reflect Fort’s political stance or endorsements.

With the conclusion of the 2024 election cycle, President Trump is set to return to office, and Republicans now hold the majority in both the House and Senate. The stock market has rallied, as it does following election conclusions, and we feel confident that the spark received by the stock market will be echoed in the US-based manufacturing sector in the coming years and, in turn, the commercial real estate market sector. With the Republicans sweeping both the executive and legislative branches, it has become less likely that the tariffs proposed by President Trump during his campaign will be met with resistance by the House and Senate. However, it is unlikely that broad sweeping tariffs will be applied unilaterally, as some have hypothesized. Additionally, commitment in any manner to the manufacturing sector is good for the industrial industry, and we are bullish on the outlook. Regardless of the implementation of tariffs, whether they meet the President’s proposed plans or not, we see a commitment to the strengthening of US manufacturing as a good thing. That being said, let us take a quick glance at the good, the bad, and the most likely outcomes of these tariffs, as declared by some of the loudest voices on the airwaves:

Best case scenario: the government implements tariffs on all imports from all sectors from all countries across the globe in an effort to facilitate an American manufacturing boom. Prices for manufacturing overseas materially increase to a point at which it becomes more profitable for companies to move their production to US soil and manufacture at home. Manufacturing increases. Jobs are created. The dollar remains strong, and the increased price of importation or manufacturing is not passed on to consumers. The purchasing power of consumers increases due to an increase in domestic production, heightened profits for companies that trickle down to employees’ salaries, and a steady price of goods. Inflation is negligible, if not zero. The economy flourishes, every company is eternally profitable, the value of ownership perpetually increases forever, and the stock market soars, never to have another down day again. There is no concept of rich and poor because everyone is wealthy and happy, and everything is swell. If this sounds too good to be true, it’s because it probably is.

Worst case scenario: the government implements tariffs on all imports from all sectors from all countries across the globe in an effort to facilitate an American manufacturing boom. In response, global governments impose tariffs on all exports to the US. Tariff disputes cause tariffs to rise to as much as 100% on all goods coming into and leaving the US. The US ramps up its defenses in preparation for a trade war. We are removed from the World Trade Organization for violating trade agreements. Manufacturing does not increase as our supply of imported goods reduces, and subsidies were not drawn up to allow grants to companies that facilitate logistics and manufacturing. The cost of goods sharply increases for both imported goods and domestically produced goods as labor shortages, wage shortages, and an inflated dollar sweep our economy. There is a crash. There is fallout. An arms race of sorts begins in order to recapture the failing sectors. Monopolistic companies are encouraged to capture more space in logistics, distribution, manufacturing, et cetera. With reduced profit, companies turn to a robotic labor solution in the implementation of AI-driven machines on factory floors and distribution centers. Unemployment sharply rises while prices remain high, feeding more inflation. You know the rest – the robots rise, they take over, there is an uprising against the “thinking machines,” and in 20,000 years, Paul Atreides is born on Caladan. If this sounds like science fiction, it’s because it probably is.

Most likely case scenario: The government implements tariffs on some imports from some sectors from some countries across the globe in an effort to facilitate an American manufacturing boom. There will be pushback, as we have seen in the past (i.e., steel imports in President Trump’s first term), but resolution will be met at either reduced tariff percentages or on tariffs for only specified goods. An increase in specific goods might prompt manufacturers in foreign countries to seek development elsewhere, though, if not profitable, they likely will not return immediately to US soil but rather nearshore and look to onshore on a long-term outlook. Some costs will likely be passed off to the consumer as it becomes more expensive for companies to manufacture or import goods, reducing net profits that will need to be regained on sales. There may be a slight short-term dip in the economy followed by an upswing in domestic manufacturing, increasing the strength of the sector and (ideally) creating jobs and purchasing power for the American people. The strengthened supply lines from companies onshoring and nearshoring will further influence increased American production, and in the long term, we see a very strong manufacturing sector. The economy, though it may not flourish immediately as listed in the best-case scenario, is resilient and will always find its equilibrium. If it sounds reasonable, it’s because it probably is.

It is fully possible that these proposed tariffs are being used as part of negotiations with foreign countries, but that does not mean there is no precedent here. The US Constitution gives Congress the authority to impose tariffs, but Congress has, in recent history, delegated tariff-setting authority to the president. That, coupled with several acts granting executive power to impose tariffs, would theoretically grant President Trump enough authority to impose tariffs on his first day in office, barring any potential pushback from the Republican-controlled Congress. Section 232 of the Trade Expansion Act of 1962 grants the president the ability to implement a tariff when there is deemed to be a threat to national security. Section 301 of the Trade Act of 1974 grants executive power to impose tariffs in a retaliatory manner when it’s been deemed that a foreign country has used unfair trade practices affecting US commerce. Additionally, Section 338 of the Tariff Act of 1930 gives the president the authority to unilaterally raise tariffs when a president finds that a foreign country has imposed an unreasonable charge on or discriminated against US commerce. Some of these actions, if taken, would not be without precedent. In President Trump’s first term, he utilized Section 232 to impose tariffs on imports of steel and aluminum and Section 301 to impose tariffs on China, tariffs that continued to exist through President Biden’s time in office. However, while both parties agree that some tariffs help protect industries from unfair competition, it is unlikely that unilateral tariffs will be implemented without contest and without at least some struggle.

This situation regarding tariff implementation is incredibly nuanced, and no one can predict with certainty what will occur in the coming months, so it is best to not get too bogged down on doom and gloom (or sunshine and rainbows) predictions. There is no way to cover all facets of the tariff outlook comprehensively without writing a novel that will surely be outdated a week out from publication. In fact, while writing this, we can be sure that some leader or official from some country from somewhere has made another comment regarding the proposed tariffs and has their own proposed response. Or perhaps Congress has proposed a bill to keep some power in global trade. Or maybe the cabinet of President Trump has urged for a slight addendum to what products or countries the tariffs should be applied to. And on. And on. And on. But we will reiterate: a commitment of any kind and in any form to bolstering the manufacturing sector is good for America and is good for industrial. The end goal of these tariffs (i.e. facilitating an increase of American manufacturing) remains what is important to us and is what we are the most bullish on because, regardless of the success of the proposed tariffs, we can ensure that other avenues will be explored in order to achieve the end goal should tariffs falter. We do not deal in a 1-to-2-year outlook, and we do not think that any investor or investment company should, so regardless of the outcome of the proposed tariffs, we are optimistic about the future performance of our industry. We believe that regardless of which tariffs are placed where, the long-term benefits of a strong manufacturing sector will only serve to improve the American economy.