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Tariffs have figured prominently in the news since President Trump returned to the White House. He says that ‘tariff’ is one of his favorite words and lauds the 25^th U.S. president, William McKinley, for using tariffs to achieve his goal of protecting the American economy. President Trump has brandished the specter of tariffs as leverage in advancing his own economic and national security objectives. They include enhancing cross-border security with Canada and Mexico, reshoring manufacturing back to the United States, reducing trade deficits with U.S.’s trading partners through fairer trade agreements, protecting American workers’ jobs, and safeguarding America’s national security. But tariffs have become a rapidly moving, economically volatile issue with potentially unintended consequences and unpredictable outcomes. Tariffs can backfire badly and hurt American consumers and manufacturers if they are not carefully calibrated to ensure that their benefits clearly outweigh their costs.

On the other hand, if tariffs are used with precision against the right targets at the right time and their purpose is clearly communicated, tariffs can play a valuable role in protecting America’s economy and national security. Just the mere threat of tariffs provides great leverage in overcoming the resistance of other countries to key U.S. demands.

President Trump has scored early successes with his tariff policies. Colombia backed down and reversed its initial refusal to take back its citizens deported from the United States after the president threatened to impose steep tariffs. President Trump also threatened Canada and Mexico with 25 percent tariffs on their exports to the U.S. if they did not show considerably more progress in securing their borders with the U.S. and stopping the cross-border flow of fentanyl. The two countries immediately began to step up their efforts to do just that, in return for which President Trump agreed to delay the imposition of these tariffs for now except on aluminum and steel.

President Trump has other tariff policy objectives besides border security. Promoting fair trade between the U.S. and its trading partners is a key objective. The president also aims to protect American workers’ jobs and stem the flooding of U.S. markets with imported goods produced below cost by the exporting countries (i.e., dumping). And he believes that it is critically important to reduce U.S. dependence on other countries – particularly, China – for items that are vital to national security.

President Trump announced that he intends to impose reciprocal tariffs on all U.S. trading partners on April 2^nd that match the existing tariffs they have imposed on American goods. Reciprocal tariffs are the essence of fair trade. Too many of America’s trading partners impose substantially higher tariffs on their imports of U.S. goods than the U.S. imposes on imports of their goods. Hopefully, these countries will get the message that it is in their best interest to sharply reduce their tariffs to avoid reciprocal U.S. tariffs at the higher levels these countries are currently charging. Once the reciprocal tariffs are set, they will form the baseline from which the U.S. and its trading partners can negotiate lower tariffs that will benefit all parties.

Some countries are beginning to take President Trump’s threat of reciprocal tariffs seriously and are adjusting accordingly. For example, India, which has extremely high tariffs on imports into its country, has shown signs of tempering its restrictive trade policies. During a meeting between President Trump and Indian Prime Minister Narendra Modi last month, the two leaders agreed to initiate talks on a Bilateral Trade Agreement (BTA) with the goal of finalizing the first phase by this fall. Negotiations between India’s Commerce Minister and his U.S. counterpart, along with U.S. trade officials, got underway shortly thereafter. As reported in the Financial Express, India’s External Affairs Ministry spokesperson Randhir Jaiswal “stated that the BTA aims to enhance India-US trade, increase market access, reduce barriers, and integrate supply chains.”

President Trump’s tariff threat is also paying dividends by influencing decisions by Asian and European firms in the automotive, technology, and apparel industries to shift some of their production capacity to the United States.

Unfortunately, however, the European Union, which represents its European member countries in trade negotiations, has been taking a more defiant stance so far. China is willing to go all out in a trade war with the United States. Canada has gone back-and-forth.

President Trump’s increase in the tariffs he is imposing on China and other countries that dump their government-subsidized goods in U.S. markets is intended to counter their strategy of flooding the U.S. market with goods sold below cost. This protects domestic companies from potentially being driven out of business by unfair competition.

President Trump also wants to protect American workers’ jobs. This objective is one of the primary drivers behind the president’s decision to impose a 25 percent tariff on steel and aluminum imports from all of America’s trading partners, including Canada and Mexico. Foreign steel and aluminum producers are competing unfairly with American companies by charging artificially low prices for the steel and aluminum they export to the U.S. that the foreign companies’ governments subsidize and otherwise support. Tariffs are a way of leveling the playing field. If successful, this would keep more U.S. workers employed by helping American companies to stay in business and spurring them to invest in building more production capacity in the United States.

Finally, imposing tariffs on imported products, parts, components, and vital raw materials that are essential to America’s national security will incentivize more domestic investment in these critical industries, including the defense, communications, energy, and health sectors. Commerce Secretary Howard Lutnick also noted that President Trump views steel and aluminum as “fundamental for our national security.”

President Trump realizes how important it is that the U.S. wean itself off depending on foreign sources of items that are vital to the U.S. domestic economy and national security. Especially America’s adversaries like China must not be able to exert a chokehold on key supply lines that can cripple critical sectors of the U.S. economy and defense in times of rising tensions.

Nevertheless, despite their benefits, tariffs are a double-edged sword. Once unleashed, they can lead to harmful outcomes for the U.S. economy such as triggering more inflation and a possible recession.

Raising tariffs means higher prices on imported goods, which often will be passed on to consumers and exacerbate inflation. Raising tariffs indiscriminately on imported raw materials, parts, components, and intermediate goods that are critical inputs to U.S.-manufactured finished products will raise the U.S. manufacturers’ costs of production for those products. These manufacturers could pass on the increased costs to their buyers, eat some or all of the increased costs themselves, or combine elements of both pricing strategies. None of these courses of action would be good for the U.S. economy.

In addition to raising costs for consumers and businesses, President Trump’s tariffs most likely will trigger an escalating trade war as some of America’s trading partners retaliate. This will hurt American companies that rely on exports to generate a substantial portion of their revenue. However, when all is said and done, other countries will likely get the short end of the stick against a determined President Trump. The United States has a major advantage with its stronger economy and a far lower dependency on global trade relative to its economy compared to America’s trading partners.

President Trump acknowledges that the American people may experience some bumps along the way because of the tariffs that he imposes on imports into the United States. However, Mr. Trump claims that any short-term pain will be worth it in the end as longer-term benefits kick in. In balancing all the pros and cons of his tariff policies, the president has concluded that their benefits will significantly outweigh their costs.

While President Trump’s tariff objectives make eminent sense, the erratic way that the tariffs are being rolled out to date has destabilized the stock market and made it difficult for businesses to plan their investment and marketing strategies. There are fears, whether valid or not, that an escalating trade war and higher prices for imported products could trigger a recession.

Making the Trump tax cuts permanent and codifying steep spending cuts as soon as possible, all through a single reconciliation bill, would help to buffer the economy from any headwinds. Moreover, while discussing his bold actions on tariffs, it would be helpful if President Trump would remember Theodore Roosevelt’s advice: “Speak softly and carry a big stick.” That way, President Trump can use tariffs to help achieve his America First policy objectives with as minimal pain as possible.