Remember what Beaulieu said about tariffs.
In late January of this year, I was fortunate enough to see our industry’s beloved economist Alan Beaulieu present at the A3 Business Forum in Orlando. As he’s announced his retirement, that keynote was likely the last time folks in our industry will get hear him speak.
Beaulieu will forever remain loved for his accurate economic forecasting, sardonic wit, and ability to speak to the absolute center on all things political. So, we all might heed his words on tariffs.
Back in January, about one-third of all imports into the U.S. were tariffed, and the value of those goods was climbing — though still lower than in the past.
“But … people don’t understand tariffs. They think, ‘We’ll throw some more tariffs on and that’ll protect American businesses, and everything will be hunky dory.’ That’s not how it works. It’s not how it works at all,” warned Beaulieu.
For starters, as a government revenue stream, tariffs are tiny. “The dollar amount that comes in through tariffs was $74B in fiscal 2024; the federal government spent $7.4T. So, tariffs are not going to save the economy, federal budget, or deficit. If we were to tax every import in the U.S. at 70% it would match what’s received from personal income taxes. Of course, that’s not going to happen,” said Beaulieu. Again, this was a January 2025 keynote when 70% tariffs were widely considered ludicrous.
Another issue is that of inflation. “There’s an impact of tariffs that doesn’t get talked about called inflation. Because if you make something cost more coming ashore, whoever is processing that, whoever is using that, whoever is adding onto it as it goes through and ends up in a B2B or B2C situation … that item is going to cost more,” he said.
When the cost of goods goes up, it’s called inflation. “So the more tariffs there are, the more inflation we could get.”
Yet another problem is the prospect of retaliatory tariffs — and at least in his keynote, Beaulieu gave no indication that hard bargaining with longtime ally trade partners would give the U.S. the upper hand.
“If we were to anger Europe, if we were to anger Germany, if we were to anger any one of our major trading partners to the point where they said, ‘We’re not going to provide you with this unless you pay a steep tariff’ — like China is doing to us on some minerals and materials that we need — if they were to do that, that also increases cost,” said Beaulieu.
Domestic exports are also put at risk. “If they put enough tariffs on us, it increases the likelihood that we’ll export less. As we export less because of retaliatory tariffs, that hurts the general economy — because about 10% of our GDP is made up of exported goods and services. So, the more that we anger people, the more likely it is that we will slow down growth in the U.S. economy,” he continued.
One last point Beaulieu made was on who pays. “The tariff is not paid by China or Mexico or Canada or the Netherlands. The tariff is paid by the person in this country. It’s a domestic tax, not a foreign tax. That means that it’s coming out of profits. As it comes out of profits, it comes out of forward progress. It comes out of shareholder wealth creation. It has a negative impact. So, please don’t be thinking this is a great thing that holds promise for us. It is fraught with danger as well.”
“I’m not against them,” clarified Beaulieu. “What tariffs can do is protect some industries that are being unfairly treated because of dumping from other nations. I’m just trying to tell you … we have to be very careful with tariffs.”
Operations relying on imported machinery, components, and materials may be most affected by any new tariffs that go into effect — as will their short-term investments in advanced technologies.
Lisa Eitel
linkedin.com/in/elisabetheitel
Filed Under: DIGITAL ISSUES • DESIGN WORLD