President Trump recently fired Erika McEntarfer, the head of the highly respected and nonpartisan Bureau of Labor and Statistics. Her crime? Allowing the bureau to publish its routine monthly report of U.S. employment data. The report was shocking. American job creation had dropped from a monthly average of over 354,000 during the Biden administration to 35,000 for the last three months (May, June and July) — a 90% drop.

Trump panicked and fired the Bureau of Labor Statistics head for reporting the truth. It is understandable that Trump panicked. American workers were beginning to experience the
negative impacts of his disastrous tariff policy.

Tariffs are a tax on imported goods. Under U.S. law, tariff duties must be paid by the “importer of record” — the person or company in the U.S. purchasing the imported item. Note, tariffs raise
costs to American buyers but impose no cost on foreign sellers. Assume a U.S. manufacturer purchases a $100 part from abroad. If the part is subject to Trump’s 50% tariff, the U.S. manufacturer, as importer of record, must pay the tariff duty to the U.S. Treasury before the part can be released by Customs. So, the cost to the U.S. manufacturer is increased from $100 to $150.

Now, the U.S. manufacturer has three basic choices.

First, it can absorb the increased cost. However, this will decrease profitability and be unpopular with shareholders and the stock market. Second, the manufacturer can increase prices and pass tariff costs to customers. This approach has risks. The manufacturer may lose customers who switch to cheaper alternatives or stop buying altogether. Third, the manufacturer can reduce other costs to offset the increased tariff cost. The easiest way to do this is to reduce the company’s wage bill — don’t hire new employees and, if necessary, lay off employees.

U.S. companies are pursuing a mix of all three strategies, and we are seeing the results. The markets fear the impact of Trump’s tariffs on company profits. But, prices bounce up and down because, while the markets fear the tariffs, many believe that “Trump always chickens out” and he won’t stick with his tariff demands. As the tariffs become an accepted reality they will have an increasingly negative effect on share prices.

Many companies are absorbing the increased tariff cost because they, too, are unsure that the tariffs will become a reality. They don’t want to risk losing customers by raising prices unnecessarily. Again, as it becomes clear that Trump’s tariffs are for real, companies will hike prices.

Trump’s policies have killed American job creation. On April 2, Trump announced his new tariff policy and American job creation dropped from 158,000 in April to 19,000 in May — an 87% drop. Subsequent months have been little better — 18,000 in June and 73,000 in July (but July remains subject to revision). As soon as Trump announced his new tariff policy, American businesses froze plans for hiring and expansion. Overnight, an economy that had been producing 354,000 jobs a month under Biden and around half that number under Trump collapsed into one averaging 35,000 jobs a month.

Why would Trump adopt such a disastrous policy? Well, tariffs do produce revenue for the government — lots of revenue. Trump just gave a $7 trillion tax break to himself, billionaires like him and big companies. Those tax breaks will add between $4 trillion in $5 trillion to the national debt. Clearly, Trump needs lots of revenue to cover the cost of these huge tax giveaways.

Trump thinks tariffs are a great way to secretly raise taxes on Americans. He thinks we will never figure it out. He thinks we will believe him when he tells us that tariffs are a tax on foreigners and not American consumers. And he thinks we will believe him when he blames inflation, unemployment and crashing retirement accounts on Mexicans, “Antifa” and Harvard University.

The American people have a choice. We can stand up and tell Trump that we refuse to let him soak us for all we are worth. Or we can quietly lie down and let Trump play us for the suckers he
believes us to be. Which is it going to be?