President Trump on April 2 announced a massive slate of tariffs on imports from most countries around the world. Trump’s stated intention in announcing the largest tariff program in nearly a century is to coerce manufacturing back to the United States.
What we’re seeing instead is a wholesale rout of the global marketplace as most economic indicators fall through the floor. It’s one of the biggest self-inflicted economic wounds the U.S. has experienced in nearly 100 years, and all the more misguided because it was eminently predictable.
Some of this may seem surreal. If you don’t work in finance, or check your retirement accounts often, you might not even know you’re affected. But the thing about tariffs, and especially in the way the Trump administration is carrying them out, is that there is a long tail of aftereffects.
Tariffs affect more than just the price of imports. They affect products made and consumed in the U.S.
Our local wine industry is a case in point, but it’s also a bellwether for the economy as a whole. Wine making is not just about the grapes. David Kent of the Darcie Kent, Almost Famous and Concannon wineries listed the vast network of imported products the domestic industry relies on: glass from Mexico, cork from Spain and Portugal, paper for the labels from Canada, aluminum capsules from Germany and barrels from France.
The other follow-on effect is that businesses are going to wait out the chaos and not make any rushed decisions. They know Trump could reverse himself next week once he realizes how much the stock market has fallen. Or maybe he won’t.
So, they’ll sit tight. They’ll put off equipment purchases or other investments in future growth, which Kent alluded to. In a period of decreasing wine sales and higher prices, why would a business try to increase production now?
This has ripple effects throughout the economy. And large industries make very big waves indeed. Canada, an early target of Trump’s tariffs, is the destination for about 35% of all U.S. wine exports, with a value of about $1.1 billion, according to the Wine Institute. And 95% of that exported wine originates in California.
Canada’s reaction to the tariffs imposed on our northern neighbor was to ban all wine imports from the U.S., leading to a 35% drop in sales. That is going to reverberate through the global economy. Salaries may be reduced or workers let go. Distributors will lose business, and retailers and restaurants will also take a hit.
Our wineries are an economic driver for our region. The vineyards of the Tri-Valley are a tourist draw and ensure our vistas remain unspoiled. The industry gives much of our area its character, and our political leaders at the city, state and federal levels should be doing what they can to protect it.
International trade is woven tightly into the U.S. economy. The wine industry is just one example of that. Everything from automobiles and appliances to clothing, computers, food, children’s toys and more are a product of a global economy.
Raising tariffs in 1930 under the Smoot-Hawley Tariff Act helped lengthen and exacerbate the Great Depression. U.S. exports dropped nearly 65% from 1929 to 1932, and food prices shot upward.
Despite what Trump believes, tariffs are universally recognized by economists as a tax on imports that are paid for by the American consumer. Given how much we’re tied to the global economy, those tariffs affect not just imports, but domestic products too. In the end, we all pay more at the cash register.
There’s a way out of this: Trump reverses most of the tariffs he’s imposed. Barring that, Congress could block the tariffs, as a bipartisan bill working its way through the Capitol seeks to do, though Trump has threatened to veto it.
It is likely that the economic and political damage has already been done to the U.S. We might still enter another recession because of the federal government’s mishandling of economic policy. But stopping the misguided tariff regime now might forestall another Great Depression, and that is itself a worthy goal.
