Part II: The Real Casualties of America's Tariff War
When Policy Hits Main Street: The True Cost of Economic Nationalism
"Houston, we have a problem." - Jim Lovell, Apollo 13 (1995)
In Part I, I laid out why the Trump administration's sweeping tariffs are a self-inflicted economic wound. In Part II, I focus on the real-world consequences—for founders, factories, and families—now facing the costs of economic policy that punishes adaptation and stifles innovation.
The stock market's panic was just the tremor. The quake is hitting small businesses, factories, and families across the country. Let me be clear about who really gets burned when economic nationalism ignores economic reality.
The Entrepreneurial Backbone Gets Broken
First and hardest hit: America's small and mid-sized businesses. These aren't multinational conglomerates with treasury departments and global footprints—they're the companies driving innovation with the least capacity to absorb shocks.
Take a hardware startup selling smart home devices. With 20 employees and $8 million in revenue, they rely on Asian contract manufacturers because domestic alternatives simply don't exist at their scale. A 46% tariff on Vietnamese imports doesn't make them "reshore" production—it forces them to choose between insolvency or raising prices so high that sales collapse.
These companies lack the lobbying power to carve out exemptions and the scale to absorb higher costs. They're precisely the innovative businesses America should be cultivating, not crushing.
These companies lack the lobbying power to carve out exemptions and the scale to absorb higher costs. They're precisely the innovative businesses America should be cultivating, not crushing.
The Pyrrhic Victory of "Made in America"
The fantasy is that shuttered factories across the Midwest will suddenly spring back to life. The reality? Many of these facilities have been closed for decades. Their equipment was sold, their workforce dispersed, their supplier networks dismantled.
Building new manufacturing capacity requires more than the negative incentive of tariffs. It demands workforce development, infrastructure investment, and patient capital—none of which these tariffs provide. What they do create is an immediate cost shock with uncertain long-term benefits.
Companies that manufacture in America already face higher labor costs, stricter regulations, and expensive real estate. Adding higher input costs through tariffs on imported components only makes domestic manufacturing less competitive, not more.
The Consumer's Hidden Tax
Americans living paycheck to paycheck won't see these tariffs on their tax forms, but they'll feel them every time they shop. When the cost of basic necessities rises—children's clothing, household goods, electronics—it's effectively a regressive tax hitting hardest those least able to absorb it.
A 10-20% increase in consumer goods prices might be manageable for higher-income households. For families stretching every dollar, it's the difference between making ends meet or falling behind.
A 10-20% increase in consumer goods prices might be manageable for higher-income households. For families stretching every dollar, it's the difference between making ends meet or falling behind. In the administration's calculus, these consumers are acceptable casualties in the crusade for "economic independence."
The Double Victims
Perhaps most perversely burned are companies that already responded to the previous round of tariffs by diversifying supply chains away from China. Their reward for this expensive, disruptive adaptation? Even higher tariffs on their new manufacturing locations.
As a board member at Everlane, I've witnessed the scramble firsthand. These tariffs blindsided even the most prepared companies. Vietnam had actively negotiated to avoid significant duties, yet ended up with one of the highest rates—46%, far beyond what any contingency planning had considered. Every Asian manufacturing hub was hit simultaneously, leaving no escape routes for companies that had already invested millions to diversify away from China.
After years spent carefully diversifying production from China to Vietnam, Everlane now faces a brutally compressed timeline to adjust pricing, reduce units, and negotiate with vendors—all for a problem they had already solved once before.
That's the cruel reality for American brands: respond to Washington's demands, and the goalposts still move. It's economic policy by goalpost-shifting, creating precisely the sort of uncertainty that stifles investment and growth.
The Counterproductive Result
The deepest irony? These tariffs may actually undermine American manufacturing competitiveness. Domestic manufacturers still rely on global supply chains for components, materials, and equipment. When they pay more for these inputs, their finished goods become less competitive globally.
An American factory making industrial equipment with imported steel, electronics, and rubber components now has higher costs but no additional capabilities. Its products become less competitive on world markets, potentially leading to lower exports and reduced production—the opposite of the intended effect.
The path to real American industrial strength isn't through blanket tariffs and protectionist financing rules. It's through strategic policy that builds capabilities rather than just raising costs.
Looking Beyond the Politics
Strip away the "America First" rhetoric, and these tariffs represent a fundamental misunderstanding of modern manufacturing. Today's production isn't a binary choice between "foreign" and "domestic"—it's a complex web of specialized capabilities distributed globally.
Rebuilding American manufacturing requires playing to our strengths: high-skill production, advanced technology, innovation, and quality. It means investing in workforce development and next-generation factories, not simply making imports more expensive.
Countries that have successfully maintained strong manufacturing sectors—Germany, Japan, South Korea—didn't do it through isolation. They did it through strategic investment, education, and integration into global value chains where they could capture the highest-value activities.
The path to real American industrial strength isn't through blanket tariffs and protectionist financing rules. It's through strategic policy that builds capabilities rather than just raising costs. Until Washington understands this distinction, American companies—and the workers and consumers who depend on them—will continue to pay the price of economic nationalism without economic logic.
If this is what "winning" looks like, America's most promising businesses may not survive long enough to see the scoreboard.