Love them or loathe them, tariffs and excise taxes on foreign-made goods are nearly as old as the nation itself. They were authorized when the U.S. Constitution was ratified in 1788 and, within a year, one of Alexander Hamilton’s first acts as treasury secretary was to slap taxes on foreign goods to protect nascent American industries – and, more important at the time, raise money for the new republic.
Regardless of political party or era, tariffs have always been part of American economic strategy, from the protectionist policies of the mid-1800s to the harmful Smoot-Hawley Tariff Act of 1930 to tariffs imposed by many modern presidents, Democrat and Republican. Tariffs sometimes require congressional approval; sometimes not.
That’s why it’s not surprising that President-elect Donald Trump has continued to ring the tariff bell since winning in November. The open question is how Trump’s rhetoric translates from international bargaining chips to actual law once he takes office.
Most economists generally see tariffs as impediments to a free market, often leading to unintended consequences such as job losses in downstream industries and supply-chain problems that raise prices for everyone. Others believe tariffs can be effective if used for specific purposes, such as to prevent “dumping” of deliberately underpriced foreign goods.
What will “Trump 2” tariffs mean for Wisconsin, a state that produces a range of manufactured goods and many farm commodities? Effects can vary by industry type.
Because Wisconsin is a major exporting state (20th out of 50) across the board, retaliatory measures could cause more harm than good for sectors such as industrial machinery, electric machinery, medical and scientific instruments, plastics, pharmaceutical products, paper products and even fire-fighting vehicles.
According to the free-market Badger Institute, federal figures show that Wisconsin’s $28 billion in 2023 exports of all types represents 6.8% of the state’s economy. Exports are also responsible for more than 100,000 Wisconsin jobs, the fall report noted.
What are the top destinations of Wisconsin-made goods? Canada, Mexico and China, the report also noted. Those nations are Trump’s main tariff targets, although each for different reasons.
“The time for promoting solid free market policies didn’t end with the vote counting,” wrote Scott Niederjohn, a visiting fellow at the Badger Institute and director of the Free Enterprise Center of Concordia University. “There is still a role for Wisconsin’s citizens and constituents to demand free market-oriented policies that genuinely foster prosperity and human flourishing here and across the country.”
Agriculture is another Wisconsin sector that could feel the pinch of tariffs, depending on what’s enacted.
The U.S. Chamber of Commerce has estimated tariffs could cost Wisconsin a billion dollars in farm exports, especially dairy products such as cheese. In 2018, Trump placed tariffs on imported steel and aluminum from several countries and some other products from China. In response, China and others slapped tariffs on U.S. agricultural products, dairy included. It led to $27 billion in lost exports nationally in 2018 and 2019.
In addition to dairy, other Wisconsin agricultural products that could be hit by a Trump 2 round include corn, soybeans, cranberries and ginseng.
For consumers, tariffs could mean price increases on gasoline, grocery products, clothing, footwear, furniture and more over time.
There’s one certainty about President-elect Trump that will likely carry over from his first administration: Bargaining is a way of life for him. His goals in the tariff debate may have more to do with other issues, such as national security, migration reform and illicit drugs, than pure economics.
It’s worth recalling that candidate Trump this year called tariffs the “most beautiful word” in English behind only love and faith. In his 1987 business advice book, “The Art of the Deal,” he signaled his attitude toward tariffs with the phrase – “Leverage: don’t make deals without it.” He has shown himself willing to withdraw from multi-lateral trade talks before, so why not again?
Perhaps that is why some industries that could be hit the hardest by tariffs over the long term are withholding their criticism until they learn more about Trump’s true bottom line. That doesn’t stop them from growing a bit nervous, however.
Tom Still is president of the Wisconsin Technology Council.
