It’s gutsy, at least. President Trump has warned Americans that his new tariffs on imports will cause “some pain” in the form of higher prices, swooning stock values, and economic uncertainty.
Politicians never ask voters for sacrifices these days, lest they end up ridiculed like Jimmy Carter after his 1977 plea to turn down the thermostat. So maybe Trump deserves credit for boldness. But Trump is asking for the wrong kind of sacrifice and blowing an opportunity to save his '"pain pitch" for an issue that tops all others — the gigantic national debt.
The pain could be widespread. A slew of economists warn that tariffs on trade partners will push the cost of food, energy, and many other products higher, just as a three-year bout of painful inflation is on the verge of subsiding. Reflation would keep interest rates higher than they need to be and ding economic growth. The problem will worsen with punitive retaliatory measures, such as Canadian vows to boycott American products like wine and bourbon.
Tariffs are taxes paid by American importers, who typically pass as much of the added cost on to end purchasers as they can get away with. That’s why tariffs are inflationary. While warning of short-term pain, Trump also said, “It will all be worth the price that must be paid.”
Trump claims that tariffs on imports will bring more manufacturing to the United States, making the whole US economy more self-sufficient. He also wants more revenue from tariffs to help offset the cost of tax cuts later this year. So in Trump’s view, higher costs today will bring a more prosperous US economy tomorrow.
That’s not what most economists foresee. “This trade war is a lose-lose for the US and global economies,” Moody’s Analytics concluded in a Feb. 3 analysis. “The only question is how big a loss it will be.” Like many other forecasters, Moody’s Analytics expects Trump’s tariffs, if they remain in place, to push inflation higher and growth lower — without any sort of silver lining.
Trump dismisses all the conventional analysis on tariffs, like the true believer he claims to be. That may explain his unusual conviction on the issue and his willingness to risk moves likely to be increasingly unpopular the longer they stay in place.
Too bad he doesn’t have the same sort of conviction on matters that really need attention. The biggest economic problem facing the United States isn’t the trade deficit, which has little impact on growth or living standards. Nor is it the manufacturing sector, which is highly productive even though services, not manufacturing, represent the lion’s share of the economy.
The national debt is America’s thorniest long-term economic problem. It’s now more than $36 trillion and on track to grow indefinitely until financial markets simply can’t absorb all the debt the US Treasury issues. While a full-blown crisis may not be imminent, recent wobbles in the bond market suggest markets are getting twitchy about the profligate US government and its unbound deficit spending.
Interest payments on the national debt are now the third-largest federal spending category, behind Social Security and Medicare. The United States spends more on interest payments than on defense, and those payments will only go higher as lower-rate debt matures and the Treasury issues new debt at higher rates.
The United States doesn’t have to pay off its entire debt. Far from it. But it does need to stanch the bleeding. Budget expert Brian Riedl of the Manhattan Institute says the United States needs to keep the level of debt about where it is today, as a percentage of GDP. The open-ended growth of Social Security and Medicare means that won’t happen unless Congress passes substantial combinations of spending cuts and tax hikes.
Riedl has outlined a plan for stabilizing the debt that includes many provisions likely to cause voters pain— but for the purpose of preventing a debt crisis and likely recession, which will be inevitable if the United States does nothing. They include trims to Medicare and Social Security benefits, higher taxes, and cutbacks in many smaller federal programs. Policymakers could swap some of these provisions in and out, but any serious plan to stabilize the national debt is going to require some combination of benefit cuts and tax hikes.
Persuading voters this sort of pain will be worth the cost is a daunting political challenge, which is why no president has taken a serious stab at it. Most analysts think it will take a crisis to trigger the sort of action that might be political suicide under more normal circumstances.
President Donald Trump signs an executive order as Treasury Secretary Scott Bessent, left, and Commerce Secretary nominee Howard Lutnick watch in the Oval Office of the White House, Monday, Feb. 3, 2025, in Washington. (AP Photo/Evan Vucci) ·ASSOCIATED PRESS
Trump is paying lip service to the national debt, but there’s no indication so far that he’s serious about the problem. The efficiency commission run by Tesla CEO Elon Musk is dabbling with payment freezes and the abolition of unpopular departments such as the Agency for International Development. This is chump change that won’t bend the deficit curve one tick on a graph. Plus, spending cuts by executive action are probably illegal and likely to be reversed by the courts.
Only Congress can approve or cut spending, and Trump’s main legislative goal is a set of tax cuts likely to add $4 trillion to the national debt during the next decade. New tariff revenue could offset a small portion of that, so one reason for the tariff pain Trump acknowledges now is the pleasure of tax cuts later. But it’s a weird flip of the old "buy now, pay later" sales pitch. Trump is telling voters to pay now, and something good will happen later.
Markets are still betting that Trump is bluffing to some extent and that new tariffs will end up far lower than what Trump is threatening once he negotiates concessions. If so, Trump would be warning voters about pain that turns out to be ephemeral. Yet real pain is coming at some point, whether the president prepares people for it or not.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
