The people have spoken. On economics, we’ll have to navigate through a period of uncertainty, tariffs and taxes

Well, investors who might otherwise be chagrined by Trump’s victory can find at least a little bit of solace from the immediate reaction of the financial markets this morning. The Dow Jones Industrial Average, as I write this, is up about 1,200 points, an astoundingly bullish reaction to the news of Trump’s win.

Considering that the Dow is up about 60% since Biden was elected in 2020, you’d expect the markets to be somewhat circumspect and cautious about a transition to an administration from another party, but, confoundingly eccentric as financial markets can often be, traders are reacting with a surge of enthusiasm. 

As an old-time trader – I began trading securities on the floor of the Chicago Board Options Exchange in 1978 – my instincts tell me to be a bit cautious right now, but, old-timer that I am, I also know when to sit back and say, “I’ll take it.”

So, I’ll take it.

Just the same, outbursts of euphoria in the markets are short-lived and generally flatten out in a hurry. In the words of the legendary Federal Reserve Board Chairman Alan Greenspan, they’re the product of “irrational exuberance.” When the knee-jerk reaction to Trump’s victory concludes, we’ll have to deal with the lasting effects of Trump’s commitment to raising tariffs across the board.

Trump’s rhetoric on tariffs, which he believes will spur domestic manufacturing by making imported goods more expensive, probably had some political value. They most likely helped him sweep the manufacturing-intense states across the midwest, aka, the “blue wall,” but considering how they flopped when he put them into actual practice during his first term, I’m hoping that Trump’s rhetorical commitment to them during the recent campaign was just that – rhetorical.  

Another element of tariffs that Trump added to his successful campaign was that he would like to see tariff revenues replace income taxes. 

In the first place, this is sort of a shell game. Tariff revenues come from American consumers and manufacturers. As the Tax Foundation notes, tariffs pay for them through higher prices. Trump would be replacing one system of taxation with another.

In the second place, as Yahoo Finance notes, tariffs represent less than 2% of federal revenues “and the idea is seen as unlikely to gain traction outside of the ultraconservative side of the Republican caucus on Capitol Hill.”

I think Trump’s comment on replacing income taxes with tariffs was just an off-the-cuff remark in an interview with podcaster Joe Rogan, but if Trump is as fixed on the idea as he is with the commitment to go into sweeping tariff mode, we could see some upheavals in the way our government does business during Trump’s second tenure in the White House.  

John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for 20 years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radioman in Vietnam. Republish with permission.