Trump's Tariffs: It's Not Just the Stock Market That's In Trouble

The president is raising taxes, hiking prices, and creating supply chain chaos. Congress should act quickly to stop this.

President Donald Trump's tariffs vaporized $6 trillion in value from the stock market in just two days of trading last week—and the bloodbath continued on Monday morning.

Here's the bad news: That's not the end of the bad news.

As ugly as the stock market losses have been, the big hit from Trump's tariffs probably haven't even arrived yet. As always, the stock market is not the economy—it's an aggregated indicator of what investors think the economy will look like in the future. Right now, they think it will be bad. Really bad.

It's hard to blame them. In addition to crashing Americans' retirement accounts and wiping out huge amounts from American companies (Apple and Nike were among the biggest losers in Friday's rout), Trump's move will soon raise taxes, wreck supply chains, and make basic goods more expensive or difficult to obtain.

In other words, even if you aren't affected by the stock market sell-off, you'll feel the effects of the tariffs before long.

Take each of those things in order. First, the tax increase. Tariffs are a form of taxation. According to the Yale Budget Lab's analysis, Trump's tariffs will reduce the average household's income by nearly $3,800 this year. That's because lots of things will get more expensive. Tariffs could triple the cost of a new iPhone, for example.

Second, the supply chain chaos. Ryan Peterson is the CEO of Flexport, a tech platform that helps companies with global logistics. He reported last week that 28 percent of the companies in Flexport's system are "pausing all ocean freight bookings from Asia until there's more clarity on where tariffs will end up."

That means that even if some American companies are willing to pay the tariffs to keep supply chains flowing, they may not be able to find importers and shipping services right now.

Finally, the tariffs (and the associated supply chain disruptions) will have an immediate impact on prices and the availability of goods.

"A trade war triggered by Trump's chaotic tariffs is the same type of aggregate shock as the Covid crisis, but worse," warns Ben Golub, a professor of economics at Northwestern. As the tariffs degrade the ability of modern international supply chains to function, he wrote on X, the results will be "supply shortages and price spikes."

To give just one example, consider the morning cup of coffee you might still be nursing. Americans consumed 1.6 billion pounds of coffee last year, but the United States produces only about 11 million pounds annually (all of it in Hawaii).

America also exports a lot of coffee—more than $900 billion of it last year. That's possible even though we don't grow very much here, because America-based coffee companies can buy beans from other countries, roast them, and then export them abroad. What are those middle-of-the-supply-chain companies supposed to do? Coffee-drinkers are screwed and coffee exporting companies that employ American workers are doubly boned.

Now repeat that same process for every industry connected to global supply chains. It's grim.

"Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth," Jamie Dimon, CEO of the investment bank JP Morgan, wrote in a letter to shareholders this week. "The quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse."

So far, Trump seems unswayed. "I don't want anything to go down, but sometimes you have to take medicine to fix something," he told reporters on Air Force One on Sunday night. 

Even if the president won't act, Congress could end this insanity in a matter of hours. Lawmakers from both sides of the aisle are backing resolutions blocking these tariffs and restricting Trump's power to levy more of them.

Perhaps another day of huge losses on Wall Street will spur them to action. It's time to take away the president's keys and end executive control over tariffs.