By Bedassa Tadesse
President Donald Trump unveiled a sweeping new tariff plan on April 2, 2025, to reshape U.S. trade and boost domestic industry.
Framing the announcement as “Liberation Day,” he proposed a 10% tariff on essentially all imports, with steeper rates for major trade partners, including 34% on Chinese goods and 20% on those from the European Union. Starting April 3, a 25% tariff on all foreign-made cars and auto parts will take effect – a move that he says will revive U.S. manufacturing and reset America’s trade agenda.
But the fanfare surrounding the announcement masks a much larger gamble. What’s really at stake is trust – America’s long-standing reputation as a stable and predictable destination for global investment. And once that trust is lost, it’s incredibly hard to win back.
The strategy is presented as a robust defense of American manufacturing and the middle class. But foreign direct investment – when overseas companies build factories or expand operations in the U.S. – depends on more than just opportunity. It depends on certainty.
If global investors start to worry that U.S. trade policy can shift abruptly, they may relocate their capital elsewhere. As such, the administration’s aggressive approach to tariffs risks undermining the very confidence that has long made the U.S. a top destination for global capital.
Auto tariffs as a case in point
Nowhere is this risk more visible than in the auto industry.
In 2023 alone, the United States attracted over US$148 billion in foreign direct investment, with nearly $42.9 billion tied to manufacturing, including in the automotive sector. Over the past few decades, major global automakers such as Toyota, BMW and Hyundai have established expansive plants in states including Alabama, Ohio and Kentucky.
These facilities – many of which have seen significant reinvestment and expansion in recent years, especially in response to the shift toward electric vehicles – employ thousands of Americans and contribute significantly to local economies.
Trump’s tariff push aims to get automakers to manufacture more vehicles on U.S. soil to overcome rising import costs. It’s a strategy with precedent. During his first term, the threat of auto tariffs, alongside existing plans, helped spur Toyota’s $1.6 billion investment in a North Carolina plant and Volkswagen’s expansion of its operations in Tennessee. It’s not far-fetched to imagine Honda or Mercedes following suit with new factories in Indiana or Texas.
But here’s the catch: “Made in the USA” doesn’t always mean “made for less.” American auto plants often face productivity and efficiency gaps compared with foreign competitors. Labor costs are higher. Assembly lines move more slowly, partly due to stricter labor protections, less automation and aging infrastructure. And U.S. automakers such as Ford and GM still depend heavily on global supply chains. Even for vehicles assembled in America, about 40% of the parts, such as engines from Canada and wiring harnesses from Mexico, are imported.
When those parts are taxed, production costs go up. Moody’s estimates that pickups such as the Ford F-150 and Chevy Silverado could cost $2,000 to $3,000 more as a result. Goldman Sachs projects price hikes of up to $15,000, depending on the vehicle. Automakers then face a dilemma: raise prices and risk losing customers or absorb the costs and cut into their margins.
A ripple effect across the economy
Tariffs may protect one industry, but their ripple effects reach much further. They raise costs for other sectors that rely on imported inputs, slow down production by making supply chains more expensive and less efficient, squeeze profit margins, and leave businesses and consumers with harder choices.
Factories represent billion-dollar investments that take years to recoup their costs. Mixed signals, such as the president calling tariffs “permanent” one moment and negotiable the next, create a climate of uncertainty. That makes companies more hesitant to build, hire and expand.
And investors are watching closely. If building in the U.S. becomes more expensive and less predictable, is it still a smart long-term bet? When a company is deciding where to build its next battery plant or chip facility, volatility in U.S. policy can be a deal breaker.
The consequences could surface soon. Goldman Sachs has already lowered its 2025 U.S. GDP growth forecast to 1.7%, down from an earlier 2.2%, citing the administration’s trade policy risks. Consumers, still grappling with inflation and high interest rates, may begin to delay big-ticket purchases, especially as tariffs push prices even higher.
The international fallout
America’s trading partners aren’t standing still. Canadian Prime Minister Mark Carney says his country “will fight back – with purpose and with force.” The European Union is exploring duties on American tech firms. Japan, a longtime ally, is signaling unease. If these countries redirect investment to other countries, the U.S. could lose its competitive edge for years to come.
And while roughly 1 million Americans work in the auto manufacturing industry, more than 150 million make up the total American labor force. When tariffs drive up input costs, it can trigger a chain reaction, hurting retailers, stalling service-sector jobs and slowing overall economic growth.
Consumers will feel it too. Higher prices mean lower sales, reduced tax revenues and shrinking profits. All of that weakens the economy at a time when household budgets are already strained.
Lessons from history
The U.S. has seen how trade policy can shape investment decisions – just in reverse. In the 1980s, Japanese automakers responded to U.S. import quotas not by withdrawing but by building plants in the United States. That response was possible because policies were clear and negotiated, not abrupt or adversarial.
Today, the story is different. Volatile, unilateral tariffs don’t build trust – they erode it. And when trust erodes, so does investment.
Yes, a factory in Indiana or Kentucky might reopen. Yet if that comes at the cost of deterring billions of dollars in long-term investment, is it worth it?
So while the president may celebrate April 2 as Liberation Day, markets may come to see it as the tipping point – when global confidence in the U.S. economy began to falter in earnest.
Bedassa Tadesse is Professor of Economics at the University of Minnesota Duluth.
Gene Perez says
Predictability fosters trust. In the past seventy years trading partners could predict that they would take advantage of our trade policies. From today on our policies will be predicable as giving advantage to America First. The sky isn’t falling. The clouds are parting.
BillC says
Listening to Howard Lutnick and Peter Navarro explain tariffs is like listening to a 6 year old explain where babies come from.
CPFL says
It was all good when Pelosi was talking about the US being ripped off by tariffs in 1996.
Al says
The US had become like the girl in high school that put out on every date. She’s popular for the wrong reason. These countries only are our allies because it benefited them. They could dump their junk here and keep the profits for themselves. When questioned about it the response is we need to protect our industry and workers. We’ll the hell with the American worker let’s just worry about their workers.
This is a matter of national security on a variety of levels. Jobs for the people who didn’t go to college, should we just forget about them. What if a major war happens then how can we build the materials needed if we don’t have the factories or skilled workers. I’m sure a professor with a defunct major could write a op-ed and all will be great. Maybe we could ask China to build us some ships so we can fight back against them.
Americans need to suck it up and deal with some discomfort so things will be better in the long run. We live in an instant world where expectations are way higher than reality. If it doesn’t change in 24 hours let’s move on is the mindset of the the populous.
Laurel says
CPFL: Pelosi didn’t crash the world.
This Trump unpredictability, like Gene Perez is happy with, would be considered flip flopping if done by any other politician. Trump is flip flopping like a fish out of water, which he is. You do not experiment with U.S. citizens lives, and livelihoods. The world’s best economists are condemning his actions.
Sorry folks, he is not a genius. His “weave” is all bullshit. William T. Kelly, former professor at the University of Pennsylvania, Wharton (that Trump has repeatedly bragged about attending) has been know to have said “Donald Trump was the dumbest goddam student I ever had.” The Wharton school remains mum about Trump’s GPA, and attendance.
The market is down this morning, nearly 1,300 points. The VIX is at 31.11%, which means that people are really concerned about spending right now. That is not good, and yes, the market matters. Hope and pray that the market goes up, because it effects us all directly. This is not a game! This is your future, which should not be played with by someone who doesn’t know what he is doing, just experimenting.
I have never seen a President talk about our people, and other countries, the way this one does. It’s just awful!
Tony Lorenzo says
At least Donald Trump has his priorities straight, yesterday I heard some ameba in the administration say that he is always working.
This was just before he got on a plane to go play golf in Doral and bring our money to his property. I believe it when he says that he doesn’t care if the price of cars go up. This is what the people that voted for him wanted and I think they should get to enjoy it fully.
Memorial Day in about 7 weeks will show if they would still vote for him after inflation rises” like no one has ever seen “ You gave a loaded gun to a toddler and told him to play with it.
The dude says
I don’t even remember where I was in 1996… much less anything Nancy Pelosi said… good god man get off Newsmax!!!
Now… to be fair… how could ANYONE have possibly known that imposing such a bigly across the board tax increase would bring the world economy to it’s knees??!?… I mean who knew?
Tony Lorenzo says
“ Gene Perez says
APRIL 3, 2025 AT 9:22 PM
Predictability fosters trust. In the past seventy years trading partners could predict that they would take advantage of our trade policies. From today on our policies will be predicable as giving advantage to America First. The sky isn’t falling. The clouds are parting.”
Eugenio , the clouds are being parted by the meteor headed to the USA, with all due respect that is significantly moronic. 70 years? Man I don’t know if you have ever heard of history , but until Nixon opened the door with China we kicked everyone’s butt and the USA remained the powerhouse for decades afterward . Until October of last year we remained the strongest economy in the world by far. Every economist who is not a lackey to DT has clearly explained the scattered “policy” that this deeply flawed psychopath has implemented . I dont depend on my IRA account, thank God ,maybe you don’t but take a look at the market if you get a chance.
Skibum says
The U.S. stock market took a drastic dive yesterday, taking all indices into a tailspin due to the ignorant and incompetent orange-faced buffoon’s global tariffs. This morning, the historic selloff and destruction of the American investment safety net continued after the stock market dove once again to lows not seen in a very, very long time, increasing concerns for a nationwide recession. And what is the idiot in the WH who is hell bent on bankrupting our country just like he did to his casinos doing today? Making the U.S. taxpayers pay for all of the security and transportation so he can while away another no-work day on one of his golf courses. Is America great yet??????????????
Gene Perez says
A little short term pain will yield a lot of long term gain. The gloom and doom shouted from the rooftops today will prove to be unfounded. This country was in a steep downward spiral. It’s turning around and making waves while doing it. Would you prefer to have Kamala Harris as president to continue the spiral? Call him or me all the names you want, but Trump was elected to fix the many things that have been wrong with our country. He’s doing exactly that. Let the man work. If by the end of the year things aren’t better, then maybe you’ll have a point. There’s a lot of law fare to overcome. It consumes time or we would be further along after even these few weeks.
Hugo Rojas says
3:08pm Dow -2090 Wining !!! The patient is in a coma induced by Dr Death .
Pierre Tristam says
I don’t know where Gene Perez gets his information about this country being in a “steep downward spiral” economically (well, I suspect we all know where he gets his information). I prefer to stick with The Economist’s assessments, repeated year after year since Obama, with the exception of the Covid Years (then despite the Covid years) that the American economy was the envy of the world–historically low unemployment, low interest rates, low inflation except for the post Covid years, still-rising productivity, and job creation unparalleled in the OECD countries. And now this:
Ed Danko, former Vice-Mayor, PC says
Sorry, but I’m not taking economics advice from a liberal professor from Minnesota. Tell us Bedassa Tadesse are you a billionaire? Millionaire? Ever elected President twice? Once? Ever even run a business? A lemonade stand perhaps as a child? Ever do anything besides teaching? No doubt you now stay up late at night writing baseless articles to supplement your meager University salary. Here’s a couple of facts for you, no one is rushing to buy EV’s, in fact lefty libs are now destroying them. Second, Ford just announced employee pricing for all buyers, so the cost of an American made Fords will not increase. Finally, most importantly, America is done being the economic sucker of the world. Those days are gone forever, and that policy is now very predictable thanks to President Trump!
BillC says
If you think the breathtaking drop in the stock market is bad, wait until the effects of the decisions made by the incompetent assholes Trump put in charge of Health and Social Security, etc. hit reality.
Pogo says
@FlaglerLive
“I don’t know where Gene Perez gets his information…”
I suggest Gene Perez’s own comments, i.e., the “Name” and “Website” fields he filled in; anyone may evaluate what he proffers for themselves.
Maybe he lives on property haunted by Machine Gun Joe and Rush Limbaugh; he sounds like their parrot — just like a good number of his Flagler Trump Fellows siblings do, too.
Personally, I prefer Odd Fellows over any of trump’s gang:
As stated
https://www.google.com/search?q=odd+fellows
Gene Perez says
Pierre, I see that the word “economically” has been edited in to my comment above. Was replacing merit with DEI an improvement? Was having transvestites put on shows for kindergartners a step up? Was having American factories shuttered while factories in China and other places thrived what’s best for our country? Was having the food we eat chemically altered improving our health?
We spend more per capita on education than any other country and get lackluster results because indoctrination has replaced development of critical thinking skills. We spend more per capita on health care than any other country and we have a population that is growing sicker by the year. Big Pharma owns the medical schools, research labs, Congress and any other entity that is a stakeholder in our healthcare. I fondly recall when doctors healed patients instead of simply medicating them for life. If those things don’t sufficiently define a downward spiral it’s only because it seemed normal to you. It wasn’t and never will be.
Tony Lorenzo says
Response to ; Ed Danko, former Vice-Mayor, PC says
APRIL 4, 2025 AT 4:10 PM
Danko, when you and your other MAGA lemmings tried to keep us independents from voting you out by bringing in “straw candidates” many people changed their affiliation to republicans (temporarily) just to make sure your sneaky trick did not work. That’s why your former position will remain as such. You are simply a fanatic who doesn’t deserve to represent alligators in Palm Coast, much less it’s citizens.
Pierre Tristam says
I don’t have time to correct Perez’s facts, many of which are wrong (not an auspicious sign for a prospective city council member) but I’ll let Don DeLillo say the rest: “We are all beginning to have this thought, of American irrelevance. It’s a little like telepathy. Soon the day is coming when nobody has to think about America except for the danger it brings. It is losing the center. It becomes the center of its own shit. This is the only center it occupies.”
Deborah Coffey says
@Gene Perez
Please stop posting so much disinformation and misinformation on Flagler Live. Stay over on Breitbart or Newsmax or FOX where the lies flow freely and you enjoy being conned. We don’t like being lied to and we despise being conned. Thanks. Our time is valuable…as were our retirement funds before your God, Trump.
Laurel says
The DJIA closed this afternoon at 2,231.07 points down. Not good. The VIX ended today at 43.31, 50.93%. Really not good.
The magas are worried about transvestites.
Sherry says
Awwww We need to sing “Maga Trollin'” for gene perez.
To the tune of “Rawhide” . . . All together now. . .
Trollin’! Trollin’! Trollin’!
Keep those Lies a Rollin’
Trollin’! Trollin! Trollin!
“Yellow Hide”
Though the Lips Are Swollin’
Just Keep those Lies a Rollin’
Through Fact Checks Where Polls Gather
Truth is Meant for Nether
Wishin’ Some Honesty Was By My Side
All The Things I’m Missin’
Like Trust and Those That Listen
Are There For Me After Maga’s Slide
Woo Hoo! LOL! Yee Haw!
Don’t bother to respond . . . I don’t waste my time on Maga Trolls.
Skibum says
Gene Perez, I had to laugh out loud when you had the audacity to question whether “replacing merit with DEI” was an improvement, now that the orange-faced buffoon in the WH has decried from above that all things “DEI” are leftist trash and consequently null and void in this current administration’s federal government and beyond. And to prove his point, drumph promptly fired SecDef Lloyd Austin, the black 41-year career military officer who rose through the ranks to serve as the Army’s Vice Chief of Staff, then Commander of the U.S. Central Command prior to being named as Secretary of Defense, and replaced him with a fauxinfotainment host who had previously served in the military and achieved the rank of Captain… with zero command experience. You call that merit?? He fired and replaced 6 other top level military leaders who had vast military and command level experience, proclaiming they were mere DEI hires despite their long and varied military careers. This included only the 2nd black officer to hold the title of Chairman of the Joint Chiefs of Staff, who had been a fighter pilot earlier in his military career. This purge also included Chief of Naval Operations Lisa Franchetti, who had a very distinguished military career covering 40 years which included a huge number of command assignments before being nominated to be CNO and voted into that prestigious position on a 95-1 vote! But she had to go, said drumph, despite being the highest ranking female in the military, simply because of being a woman… so she just MUST have been totally incompetent and merely another “DEI hire” to be replaced by someone who’s main qualification per the idiot in the Oval Office is that is must be a man. You call that merit??
Then you swing to “transvestites” who you think are putting on shows for kindergarten aged children. I think you mean drag performers? Well excuse me, but you apparently got your panties all in a bunch and forbade anyone in your household to watch actors like John Travolta who performed in drag in “Hairspray”, Robin Williams, who was the drag outfitted grandma-like “Mrs. Doubtfire”, Jack Lemmon, who did drag in “Some Like It Hot”, Dustin Hoffman, the irrepressible soap star character in “Tootsie”, Eddie Murphy in “The Nutty Professor”, Michael J. Fox in “Back To The Future Part II”, Tyler Perry, who of course is the feisty woman in all of his Madea movies, and even beloved actress Julie Andrews dressed up and portrayed a man in one of her films. None, I repeat, NONE of these well known drag performances were obscene or crude, and even children as well as adults all over have laughed and loved watching them perform. Live drag performances are mainly comedic as well… I know because I have attended numerous such performances in the past, and yes, even children were present at some, but none of the ones I were at could be perceived as only for adults, or obscene, unless you made it that way in your own dirty mind!
You talk about education and say that we “have a population that is growing sicker by the year”. How then, is it appropriate for the buffoon in the WH to orchestrate the firing of our nation’s experienced medical researchers and scientists, and put an anti-vax, conspiracy theorist idiot with a brain worm, with zero medical background or experience, in charge of the federal government’s Health and Human Services? Is THAT your idea of merit??
You, sir, have a hell of a LOT of explaining (or backtracking) to do!