Asked nearly 40 years ago what he needed most, less regulation or lower taxes, a small manufacturer of machine tools replied: “We need both,” he said, “but the thing we need most is certainty.”
“Businesses have to plan out months and years,” he said. “We have to plan for employee salaries, tax rates, benefit costs, energy prices, selling cost, and the value of the dollar if we export or import. There’s a huge risk of failure trying to know what all that will be two years or even two months down the road, and if we’re wrong our businesses and our employees get hurt. The worst thing for a business is uncertainty.”
Nothing about that has changed.
Economists are free to argue about the viability of tariffs, although most conservative and even liberal economists tend to line up with the legendary Thomas Sowell over Paul Navarro.
But one thing about which there should be no argument: Imposing massive tariffs with a heretofore unknown formula that is defective, even on countries with which the U.S. has a trade surplus, on products we cannot make (think: coffee, chocolate and bananas), and on islands populated only by penguins does not inspire confidence in the process.
Nor does watching the bottom drop out of the stock and bond markets, and its effect on the 61 percent of American adults holding stocks in personal or retirement accounts.
It might be comforting if these actions were explained coherently. But they aren’t: Those advising the president seem to have tested a variety of themes to justify them, almost as if the evidence was gathered after the decision had been made. Only after a week had passed did the White House even unite on the message that it all was all just a masterclass in trade negotiation.
So, putting a “pause” on most tariffs (but keeping them on neighbors Mexico and Canada) while making clear the goal is not abandoned and we have to do it again in 90 days creates chaos for American businesses who hire Americans to make or supply products to Americans.
Which is why your retirement account remains volatile.
It is no different for Virginia business owners. A story in the Richmond Times-Union by Michael Martz (count us biased in favor of reporters who put our appointments on the front page) noted the inability of businesses to plan: “The volatility is beyond insane, “ said Kent Engelke, chief economic strategist and managing director at Capitol Securities Management in Richmond. “You can’t make decisions. The only thing that is certain is uncertainty. Everything else is conjecture and rhetoric.”
Nancy Thomas, president and CEO of Virginia’s association of retail businesses, InUnison, agreed that the temporary 10 percent tariff floor is destabilizing: “The key word is ‘floor.’ It could go up. It probably won’t go down. All they can anticipate is that these large tariffs are not going to go away.”
Among those destabilized are the 120 retailers at Northern Virginia’s Eden Center, which hosted President Trump for an event during his campaign.
“Financially, this tariff could devastate small family-run businesses that have served as anchors of our community for generations,” said Jess Nguyen. “Many of these business owners operate on razor-thin margins, considering the current economic landscape of the Eden Center.”
A trade war would be bad news for those who make American products as well. Bill Butcher, founder of Port City Brewing Company in Alexandria notes that his craft brewery depends on high-quality, climate-dependent pilsner malt from Canada. A 25 percent tariff, he says, means “we’re going to have to raise our prices. This $12.99 six-pack of beer is going to end up at $18.99.”
As Thomas Jefferson Institute president Derrick Max has noted, “… international trade plays a vital role in Virginia’s economy, driving growth, supporting jobs, and enhancing competitiveness. According to the U.S. Global Leadership Coalition, in 2023, Virginia exported $22.4 billion worth of goods, with key markets including Canada, China, and India. The agricultural sector alone contributed $1.5 billion in exports, underscoring its importance to the state. Additionally, over 7,000 Virginia-based companies are engaged in exporting, 85% of which are small- and medium-sized enterprises. A trade war puts these jobs and these businesses at significant risk.”
Nor is this exclusively a Northern Virginia problem. The effect on the Commonwealth’s rural communities would be stunning.
Over at The Cardinal News, which specializes in reportage of red-state, rural areas, editor Dwayne Yancey did a deep dive into the impact of a trade war with Canada, concluding “the parts of Virginia at most risk in a trade war with Canada are west of the Blue Ridge, specifically the 6th and 9th Congressional Districts the two most Republican districts in the state…. Between them, those two districts have nearly 10,000 jobs and nearly $1.8 billion of goods tied to exports to Canada … If you factor in services that companies in those districts are selling north of the border, then the trade value rises to $2.69 billion.”
And it’s not just Canada and not just agriculture. Over the past decade, the auto industry has created 8,000 jobs in places like Pulaski and Roanoke Counties, in cities like Salem and Danville.
All of this has electoral consequences, right down to the proverbial dog catcher.
The reality of tariffs on jobs and inflation is altering the perceptions of those who voted in 2024 and will vote again this year. With 98 percent of Americans in the April 13-15 YouGov Poll citing inflation as “very or somewhat important” and their most important concern, 48 percent (53 percent of moderates) believe tariffs are harmful to the economy with no real long-term benefits. Another 38 percent believe tariffs will cause short-term economic pain. Little wonder, then, that voters disapprove of how the President is handling the issue of inflation by a margin of 55-37.
That’s a national survey – considering that Kamala Harris won the state by a nearly six-point margin, the numbers are likely grimmer in Virginia … putting Republican candidates this year in a very dangerous zone.
And if one overlays maps of where older Virginians live and where Trump voters live, and there is massive overlap. If, 90 days from now, the markets respond to a renewal of tariffs in the same way they did this month, that hissing sound you hear is the sound of retirement savings and Republican votes escaping into the atmosphere.
Although the President is not on the ballot, his popularity ratings will surely have an impact on turnout and voting patterns in state elections this November. The Left has not waited to roll out attack ads for 12 House of Delegate seats, including eight held by Republicans but in districts lost in the presidential election last year.
It’s a political axiom that voters tend to vote against more than they vote for. With memories of her role in the Clinton Administration, they voted against Hillary. After four years, tired of the drama, they voted against Donald Trump. Four years later, astonished about the condition of Joe Biden and White House claims that he was healthy as a racehorse, they flushed that administration down the drain, too.
Democrats have their own problems, of course. Rank and file Democrat activists want a party that’s even more progressive than the one they have now, despite the fact that in the voting booth voters have rejected progressivism.
But voters also take their cues from the federal administration, and that means results from 2017-2021 suggest that if the issue becomes personalities in Washington, progressives might win: Virginia kicked off that period with a 2017 election resulting in the election of Ralph Northam and a Republican loss of 15 seats in the House of Delegates. Nationally, that trend continued.
As happens every four years, Virginia is the first test of the new Presidency and a referendum on its policies, popularity and electoral prowess. The task for Virginia’s Republican candidates is to prove not only the devastating consequences of the Left’s economic, social, and safety policies but also to re-assure voters of their competence and ability to direct the state with discipline towards policies and programs that make Virginians lives better.
Chris Braunlich is senior advisor and former president of the Thomas Jefferson Institute for Public Policy. He’s run four times for public office, winning twice, and may be reached at [email protected].