Trump’s Tariffs Do Invisible Damage
The economy may be growing, but imagine how much better things could be.
By Matthew Hennessey Aug. 4, 2025
I keep reading that Donald Trump is an economic genius. While he has tariffed the economy from here to Timbuktu in contravention of free-market orthodoxy, the punishing recession prophesied by the priests of the economic religion hasn’t come to pass. In fact, the economy is growing. Therefore it has been declared that Mr. Trump is a better and more clever economist than even the most credentialed practitioners of the dismal science. He’s brilliant. MAGA wins again.
I can’t help but think of the old joke. An optimist falls from a skyscraper. As he passes each floor on the way down, he says: “So far, so good.”
Fair enough, the numbers look good. The data say the economy grew at a seasonally and inflation-adjusted 3% annual rate in the second quarter. Employers are still adding jobs. Consumers are still spending. Brilliant. Wonderful. But absent amid the triumphalism has been any consideration of what can’t be seen—the economic activity that hasn’t and won’t happen because of the tariffs.
Left-leaning economists frequently swipe at the profession’s obsession with gross domestic product for its failure to account for the nonmaterial aspects of life, such as psychological well-being and ecological health. Frédéric Bastiat’s Parable of the Broken Window made the point that destruction can increase GDP by stimulating the need for repair. And GDP has another shortcoming: It can’t account for the buying and selling we don’t engage in because of the disincentive effects of bad policy. When you run out to put a down payment on a new car, it shows up in the GDP numbers. When you decide to squeeze another year or two out of the old jalopy, no entry is recorded.
Mr. Trump is tacking so fast on his tariff negotiations, throwing out new rates and new threats every week—sometimes every day—that no one can say for sure where it will all eventually settle. No company with any exposure to overseas markets can plan under such circumstances. In what dataset can we find an accounting of the domestic investments that aren’t being made because of the uncertainty surrounding Mr. Trump’s mood swings? The companies that aren’t expanding because they can’t be sure if their supply lines will hold? The employees who aren’t being hired because of the trickle-down effects on Main Street of a global trade war?
Bastiat (1801-50) taught us the importance of considering all the economic activity that doesn’t come to pass because of a particular policy. Henry Hazlitt (1894-1993) updated that wisdom for American readers a century later: “The bad economist only sees what immediately strikes the eye; the good economist also looks beyond.”
The MAGA right will say that shaving a few points off GDP is worth it in the long run if it means we can reshore certain key industries or send China a message about our national resolve. Sure, there will be some short-term pain. Sure, some sacrifices will need to be made.
No nation was ever made more secure by limiting its own potential. No society ever thrived by taking the wind out of its own sails. Short-run considerations are of course important, but be wary of those who declare the race over before the first turn.
“In the long run we’ll all be dead,” John Maynard Keynes once muttered. A contemptible sentiment. He might as well have said, “To hell with future generations.” That attitude might be defensible during an economic emergency such as the Great Depression, but it isn’t how most Americans view their economic lives. It isn’t a responsible approach to policy-making in ordinary time.
Mr. Trump started this global trade war. He gets credit for the little bump in GDP last quarter. But everything else that comes from his unprovoked tariff salvos—now and in time to be—will be chalked up to his account as well. These are still the early innings.
“It almost always happens that when the immediate consequence is favorable the later consequences are disastrous,” Bastiat wrote. “From which it follows that a bad Economist will pursue a small current benefit that is followed by a large disadvantage in the future, while a true Economist will pursue a large benefit in the future at the risk of suffering a small disadvantage immediately.”
Mr. Trump’s cheerleaders are eager to collect their trophies and head home. They don’t seem worried about anything beyond tomorrow. The long-run consequences of the protectionist extravaganza, if they materialize at all, are a problem for some other president to sort out. In the seventh month of his second administration, all that matters is, so far, so good.
Just don’t look down.
Mr. Hennessey is the Journal’s deputy editorial features editor.