Indiscriminate And Poorly Thought-Out Tariffs Will Weaken America's Credibility, Industrial Might, Security And Global Prestige.
The Strategic and Economic Fallout of Trump’s Tariffs.
Trump’s tariffs are not only poised to cause economic havoc—an impact that will only worsen as countries like China retaliate with reciprocal tariffs (China imposed a 34% tariff yesterday)—but they also carry substantial national security implications, which we will unpack below.
The manner in which these tariffs are being imposed, including on close allies and on countries we are actively trying to wean off Chinese economic influence, directly undermines U.S. national security goals.
The United States aspires to remain the preeminent superpower, but such unilateral and indiscriminate economic actions risk pushing key partners away—accelerating the diversification of global trade routes and supply chains away from the U.S., and empowering China’s integration into these systems.
This erosion of economic dependencies on the U.S. will diminish American credibility, casting doubt on our global commitments, including those related to national security.
Strategic Use of Tariffs: Legitimate Uses And A Missed Opportunity.
There is, to be clear, nothing inherently wrong with using tariffs strategically to achieve critical economic or security objectives.
It is important for the U.S. to 1) Maintain domestic steel production, 2) Preserve and expand industrial capacity, 3) Retain spare capacity in key sectors, such as automotive manufacturing.
Indeed, general assembly line capacity in particular is crucial at the time of war.
Historically, U.S. industrial muscle—particularly the auto sector—was pivotal during World War II in scaling up the production of tanks, aircraft, and other war materiel.
During World War II, the U.S. civilian automobile industry played a pivotal role in transforming the American economy into the “Arsenal of Democracy.”
Detroit’s auto manufacturers rapidly retooled their assembly lines to mass-produce military vehicles, aircraft, and equipment—effectively outproducing the Axis powers by overwhelming margins.
In February 1942, the U.S. government banned civilian automobile production: the last civilian car rolled off the line on February 22, 1942.
Over 400,000 unfinished civilian cars were stored for rationed civilian use.
Instead, factories retooled to produce: Tanks, Jeeps, Aircraft engines and fuselages, Military trucks, Guns and ammunition etc.
The production figures from 1942–1945 demonstrate how overwhelming industrial capacity enabled the U.S. to win the war.
More than 2.8 million military vehicles, 300k aircraft, 88k tanks and 250k+ artillery pieces 257,000 were produced.
America outproduced all other allies combined.
Ford Motor Company produced B-24 Liberator bombers at the Willow Run plant—one bomber every 63 minutes by 1944.
General Motors produced more war goods than any other company—over $12 billion in military contracts.
Chrysler built the famous M4 Sherman tanks and aircraft engines.
By 1944, the U.S. output alone exceeded the combined total of Germany, Italy, and Japan in virtually all war-related manufacturing.
And it was U.S. production lines that pumped out and supplied (via Lend-Lease) more than 14k airplanes and 13k tanks for the USSR.
(side note: and it is now our European allies doing something similar: with Rheinmettal converting VW assembly lines to build tanks)
Now, as of today, the industrial capacity picture is less optimistic.
The current competitive gap with our most likely major adversary, China, is stark: China now produces half of the global steel supply with approximately 1 billion tonnes produced annually.
In comparison, the U.S. produced around 80 million tonnes per year.
Depending on the year, China regularly outproduces the U.S. by a factor 11-13x.
The situation is even worse in shipbuilding: China's shipbuilding industry dwarfs the US in terms of capacity and output, with China building far more ships, both commercial and military, than the US, and having a much larger shipbuilding workforce.
Overall, China's shipbuilding capacity is estimated to be 232 times greater than that of the United States: in 2023, one Chinese shipbuilder constructed more commercial vessels by tonnage than the entire U.S. shipbuilding industry has built since the end of World War II.
So as a crucial reminder, in times of war, industrial capacity matters more than nominal USD spent on the military.
This is why nominal GDP or defense spending figures alone are poor indicators of strategic capability.
Comparisons like “Russia’s economy equals Italy’s” based on USD GDP ignore that Russia can produce vastly more hardware, machinery, and weaponry, more quickly and cheaply—despite its lower income levels.
The same logic applies to China’s military-industrial capacity, which remains formidable despite a lower defense budget in USD terms.
Poorly Targeted, Counterproductive Tariffs Will Not Address This Gap.
So clearly, well-targeted precise tariffs (and Biden admin style incentives/subsidies like the CHIPS act or IRA) pursuing the goal of industrial revival are legitimate strategic aims.
But that is not happening at all.
The core issue lies in the arbitrary and simplistic methodology used to impose tariffs, often based on trade surpluses with the U.S.
(side note: the Trump administration's approach centered on calculating tariffs based on a country's trade deficit with the U.S., assuming that these deficits are solely due to the other country's trade policies, such as tariffs. The formula used to determine tariff rates was overly simplistic: dividing the trade deficit by the value of imports and then applying a percentage. with a minimum of 10% even if there is a U.S. surplus.)
This has led to absurd outcomes—such as 44% tariffs on Sri Lanka.
Is it in the U.S. strategic interest to re-onshore garment manufacturing, or should that remain a path for lower-income countries to escape poverty?
How is it in U.S. national security interests that instead of rebuilding hard power/industrial might, we redirect scarce labor resources (manufacturing industry in the U.S. is already up to 2.1 million unfilled job openings by 2030) to produce low-cost garments in the U.S.?
More importantly, these countries South and Southeast Asia (like Vietnam - facing a 46% tariff) are key to the U.S. effort to reduce supply-chain dependency on China.
By hitting them with punitive tariffs, Washington is effectively pushing them closer to Beijing.
And a number of allies with whom the U.S. enjoys a surplus were still facing punitive tariffs.
For example, in 2024 the biggest trade surplus in goods was with the Netherlands ($55bn), which received the same tariff rate as Ireland — with which the US ran a goods deficit of $87bn over the same period.
Why? Because a blanket 20% tariff was imposed on the entirety of the EU (that is in addition to the universal baselines of 10%) without distinguishing between countries.
And allies like Australia and the UK (U.S. surpluses of $17.9bn - $11.9bn respectively) would still face the minimum 10% tariff.
Way to damage relations with closest allies.
Even within the narrow lens of automotive industry policy, the damage is evident.
Markets have already responded negatively to 25% blanket tariffs on auto imports.
Input costs for U.S. manufacturers are rising, reducing profit margins, investment capacity, and overall competitiveness.
For instance, one of the largest auto suppliers Stellantis has already cut 900 jobs in the U.S. as a direct response.
Indeed, if the tariffs were supposed to be good for the auto manufacturers in the long term, then markets would not expect lower future corporate profits from major U.S. car producers - leading to their declining stock market prices.
And the claim that this is temporary pain and that other nations will now choose to build plants in the U.S. to avoid a 25% tariff is mostly unconvincing.
Labor costs, regulatory hurdles, and higher overhead make the U.S. a poor substitute for most firms.
Only in marginal cases will reshoring happen.
Beyond the immediate costs, the uncertainty generated by erratic trade policy is even more damaging.
Investment decisions in manufacturing and supply chains are made over multi-year horizons.
With U.S. politics in flux—Congress potentially limiting presidential powers, or Democrats retaking control in 2026—many firms may delay or cancel investments entirely rather than navigate such unpredictability.
(side note: there is already a bipartisan movement in the Senate - with a number of GOP defections - to curtail Trump’s tariff authority, further clouding the horizon for long-term industrial policy.)
And all this is in addition to the possibility that Trump himself may cancel these measures after a slowdown in growth, higher inflation or even recession may take place - so for many months, a lot of manufacturers will have to delay their investment/relocation decisions.
Imposing indiscriminate, ill-thought tariffs is not going to revitalize U.S. industrial capacity.
It will instead, raise input costs, alienate allies and increase the dominance of China (which unlike the U.S. remains open to trade with the rest of the world) in the global markets and supply chains, and push swing states like Vietnam, Indonesia ,Malaysia and other countries of the global south closer towards Beijing: all of these are strategically bad outcomes for the U.S.