The Trump administration’s implementation of tariffs is founded on the belief that raising prices on specific items can be beneficial, but this approach overlooks the broader economic consequences. Frédéric Bastiat, a renowned French economist, highlighted the distinction between the visible and hidden outcomes of economic measures, emphasizing that every action has both seen and unseen effects.

A clear example of this is President Trump’s tariffs on steel and aluminum. While the immediate effect is an increase in the cost of imported metals, the indirect consequence is a rise in domestic supply costs, often unnoticed at first. This can lead to American manufacturers adjusting their prices in response to increased competition, thereby impacting various downstream industries such as automakers and aircraft parts manufacturers.

The chain reaction caused by a single tariff can result in higher prices across multiple sectors, ultimately making it more expensive for companies like Boeing to produce goods within the U.S. Meanwhile, foreign competitors, like Airbus, can take advantage of lower production costs to gain a competitive edge in the global market. This dynamic not only hinders growth and job creation in American manufacturing but also diminishes the industry’s ability to innovate and remain globally competitive.

Furthermore, the application of tariffs at various stages of the production process can lead to cumulative costs that are eventually passed on to consumers. This was exemplified by a Canadian auto parts maker, Linamar, whose production of a single transmission involved multiple border crossings, each potentially subject to additional tariffs. Such complexities in supply chains underscore the detrimental impact of tariffs on manufacturing operations and consumer prices.

Over time, tariffs can stunt domestic firms’ innovation and growth by shielding them from competition, thereby limiting their potential for advancement. By insulating businesses from external market pressures, tariffs inadvertently hinder technological progress and erode the competitiveness of American industries on the global stage. In essence, the imposition of tariffs can have far-reaching negative effects on U.S. manufacturing by impeding innovation, stifling competition, and ultimately hindering economic growth.