I find it both hilarious and sad that Americans elected someone who doesn’t understand economics. Indeed, our new president’s ignorance of economics is not just once-fold, but thrice-fold.

The dumb, fat American has been an archetype now for decades, but at least our presidents have always been educated.* That has now changed. Case in point: our president, Donald J. Trump, does not understand tariffs. This will be shockingly bad for the ~77 million Americans who voted for him… and also shockingly bad for the ~258 million other Americans, too.

I wouldn’t necessarily call Trump anti-intellectual, per se, though he may be that, too. It’s just that the people with whom he surrounds himself, from Roy Cohn, down past Rudy Giuliani, to the likes of Michael Cohen, are all able to pass the bar exam but just can’t seem able to complete one book about economics among them. Indeed, Trump has unknown unknowns orbiting his head, not just known unknowns. (Thank you, Rumsfeld~)

Have you seen Trump’s stance on tariffs? Why have none of his aides called him out on this? I have 20somethings on my team here at my office who understand economics better than the president of the United States.

Now, to be fair, Trump’s goals are clearly stated. He wants to 1.) shrink the U.S. trade deficit, 2.) rebuild the manufacturing sector in the U.S., and 3.) generate revenue for the federal government. Fair enough. Those aren’t really national goals that I would choose, were I president, but at least he has clearly stated his goals.

What’s hilarious, and sad, is that Trump thinks he’s going to do all this with tariffs. That shows he is ignorant of economics. He does not know which tools are needed to accomplish his goals, and he does not hire smart people who can tell him. Did you think Don Jr. could explain trade? I didn’t think so.

This is a clear example of government policy (tariffs) not meeting stated policy goals (trade deficit, manufacturing, revenue). There’s a mismatch between government policy goals and government policy. The libertarian economist in me rolls his eyeballs in disbelief. Yes, government is clearly inefficient, and our current Trump administration is a clear example of such inefficiency. You’d think someone would want to drain the swamp of Trump and his ilk, wouldn’t you?

First, to truly shrink the U.S. deficit would require fundamental economic changes, with the savings rate increasing or the investment rate decreasing. It is not obvious that either change would be desirable, though. High investment, in particular, is vital if the U.S. wants to hold its own in new technologies, including artificial intelligence. [Note: Trump has now announced an AI fund that will be funded by Softbank, OpenAI, and Oracle.] Also, a monomaniacal focus on the trade balance has no bearing on the economy’s real strengths: Germany, Korea, and Mainland China today run HUGE trade surpluses, and all are mired in lackluster growth. So Trump is ignorant on Count #1 (trade surpluses).

As for Count #2 (U.S. manufacturing), manufacturing as a share of U.S. employment has fallen since Trump’s first administration (2017-2021). About 9.7% of the U.S. labor force works in manufacturing now (2023 figures). Companies in industries directly protected by tariffs during Trump’s first administration — notably steel and aluminum — did indeed increase their revenues. However, that gain came at the expense of the thousands of downstream companies that suffered from higher input costs. Put another way, the U.S. protected the parts of its economy that were struggling in the global marketplace by imposing burdens on its most competitive industries. That is hardly a recipe for a manufacturing renaissance. So Trump is ignorant on Count #2 (U.S. manufacturing).

Finally, Count #3 (increasing revenue for the federal government). Well, Trump has talked about completely replacing the income tax with tariffs. This is a beguiling vision: eliminate taxes on hardworking Americans and force foreigners — damn, foreigners! — to foot the government’s bills instead. The EXTERNAL Revenue Service — a brilliant bit of Trumpian marketing, there — would displace the INTERNAL Revenue Service. Ha ha.

Deep sigh…

Data from Trump’s first term demonstrate that the real costs of tariffs are borne, to a large extent, by U.S. consumers through higher import prices. Tariffs make U.S. shoppers weaker because we buy less, as things cost more. Americans pay the tariffs. So Trump is ignorant on Count #3, too (federal fiscal revenue).

Our president has thusly proven his ignorance concerning trade surpluses, concerning U.S. manufacturing, and concerning federal fiscal revenue. He is guilty of economic ignorance on three counts.

Wait! That’s not all!

What’s saddest for Americans — and most hilarious — is the banal reality that tariffs will BARELY MOVE the fiscal needle in terms of U.S. federal government revenue. Even if import levels were to remain constant (which they wouldn’t), a 10% universal tariff would fund little more than ~5% of the federal budget. In reality, as we all know, imports would not actually remain constant, but would decline: higher tariffs raise the price of imports. So the years from January 2025 (today) to January 2029 (when #48 takes office) will be very tough on Americans.

There’s one final hilarity concerning Trump and his administration’s total lack of understanding vis-à-vis economics: even by Trump’s own flawed logic, tariffs cannot both 1.) create lots of jobs and also 2.) raise large amounts of income for the government. That is to count their effects twice over.

So… you may call Trump “anti-intellectual.” Sure, whatever. The reality is that he is simply ignorant of economics. He has not taken Econ 101. If I were the Wharton School at the University of Pennsylvania (UPenn), I would revoke his MBA. Trump couldn’t even pass a trade tariff case study.

So, good luck to you ~77 million Americans who voted for him, and to the ~258 million other Americans who did not vote for him, because you will all be poorer and in worse health when #48 takes office on January 20, 2029.

*George H.W. has a BA from Yale, Clinton has a law degree from Yale, George W. has an MBA from HBS, Obama has a law degree from Harvard, and Biden has doctor in law from Syracuse.

Sources: Bloomberg, The Economist, Wikipedia.

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