Who will administer Trump’s tariffs if the federal government gets gutted?
“We are solidly in uncharted territory right now,” says Elena Patel, formerly an economic adviser in the Obama and first Trump administrations.
What a difference 10 years makes.
When Donald Trump began seriously running for president in 2015, tariffs were ill-favored on both sides of the aisle. As a means to raise revenue, they were largely relegated to the history books.
Trump has praised protectionist trade policy since the 1980s, but during his first administration, tariffs were targeted. The Commerce Department investigated whether American industries were being harmed by trading partners and recommended products to impose defensive levies upon.
That’s not what’s happening this time, says Elena Patel, who worked for the Treasury Department from 2012 to 2018 during the Obama and first Trump administration. Today she is an economics professor at the University of Utah, where she is watching Trump unveil 10% tariffs on all imports and further levies that target allies and competitors alike.
“These are alarmingly high, broad tariff rates that we don’t have any experience with in recent American history,” said Patel, who served as a senior economist on the White House Council of Economic Advisers from 2023 to 2024.
The Inquirer talked with Patel about whether the tariffs can be expected to survive Trump’s administration — as many of his targeted first-term levies did — and the immense bureaucracy needed to implement trade policy changes.
Are you surprised by the scale of President Trump’s proposed policy changes? A lot of people on Wall Street seemed to have been caught off guard.
I’m not surprised because President Trump has been promising broad tariffs pretty much since he began his campaign. … But these are incredibly large tariffs. They are going to make imports more expensive, and that is going to affect every single industry and every single consumer in different ways. They will start to be felt pretty immediately once these things really go online.
It will also take a heroic effort to lift this up and administer it, which feels like worth noting in a world where we are gutting the federal workforce.
For me, especially as a former Treasury employee, I can’t overestimate how much work it will be to administer these broad-based tariffs. We weren’t set up to do it when we were at full fighting strength in the federal government. So there’s an enormous disconnect now between the personnel actions that are being taken by the administration and the demands that they’re about to place on federal workers.
What sectors of the economy could be most exposed?
Manufacturers are waiting to see specifically how this is going to play out because the administration of this is going to be very complicated. I don’t see how they can do this quickly.
At a minimum, I would imagine for the next year or two at least, and probably longer, these tariffs and retaliatory tariffs are just going to increase the cost for businesses because there’s no way to quickly onshore car production, for example.
Cars are being produced where they’re produced, and there’s nothing in the short run that can be done to change that. So all that will happen is the price of everything will go up.
Let’s say a Democratic candidate wins the presidency in 2028. Is this something that even could be easily rolled back?
The executive branch has amassed broad authority to impose tariffs by bypassing Congress, so that means that tariffs [can] whiplash with the administration.
Before Trump, we really weren’t engaging in tariffs as a trade and negotiation tactic, but the first Trump administration took the guardrails off. The Biden administration continued with this, and now we’ve seen this go to the extreme of this administration testing the executive branch’s authority to impose tariffs.
If I were a manufacturing business, I would be a little bit wary of onshoring investment in supply chains that are going to be more costly in the U.S., as opposed to just waiting a few years for the administration to change. Or waiting for Congress to reassert its authority over the power of the purse. None of this is permanent. Nobody should think of it that way.
One theory is that this is part of Trump’s larger modus operandi, that he likes to threaten punishment on various actors and then hash out individual deals with them on terms he believes are favorable.
It remains to be seen. It could be that three months from now, there’s a softening of all of this tariff language that comes with bilateral tariff negotiations.
But things are very out of whack right now. Tariffs on U.S. products in Europe are like 1% to 2%. And so I don’t know what the negotiation tactic is. I’m not sure what he’s trying to achieve.
Things with China and the U.S. are different. China and U.S. relations are part of a much bigger geopolitical conversation than a particular tariff on a particular good.
But if you think about the rest of the world, the tariffs are not reflected in the reciprocal tariff rates that were announced by this administration. It’s not obvious to me whether the juice is worth the squeeze, given the loss in wealth in the markets that has come from the volatility.
A developer said that while construction cost increases are a little concerning, the larger uncertainty is going to make it harder to finance projects.
Uncertainty is toxic for the economy, especially for capital markets and investment. What businesses want is stability. A lot of the volatility in the markets is just a reflection of the increase in chaos and uncertainty and the inability for consumers and business owners to predict where we’re going to be a month from now.
We’ve not seen tariffs like this in the last 60 years. The last few days is in the 99.9 percentile of the worst string of days for the market since the Great Depression. So we are solidly in uncharted territory right now.