Americans have probably heard the word “tariffs” more in the past month than in the past four years — and for good reason. Tariffs are central to Donald President Trump’s economic playbook, despite opposition from mainstream economists and trade experts.

A common defense of Trump’s tariff strategy is that it serves as a negotiation tactic to pressure firms into bringing production back to the United States. However, without a comprehensive plan to support strategic businesses capable of competing, tariffs alone cannot rebuild the industrial ecosystem the United States has lost. Worse, tariffs can disrupt American supply chains, leading to unintended consequences.

Consider Trump’s most recent plan for “reciprocal” tariffs intended to address what he perceives as unfair trade practices that disadvantage American exporters. “I’ve decided for purposes of fairness that I will charge a reciprocal tariff. It’s fair to all. No other country can complain,” Trump explained. His argument rests on tariff disparities: For instance, the U.S. tariff on ethanol is 2.5%, while Brazil charges 18% on U.S. ethanol exports. The same is seen across many industries and trading partners.

While intended to level the playing field, these tariffs have strained trade relations with key partners like Mexico, Canada, Japan, Germany and South Korea. Pressuring companies to manufacture in the United States may seem like a strategy for economic revitalization, but many industries lack the infrastructure, workforce or favorable cost structure for large-scale reshoring in the short term.

This challenge is particularly evident in the automotive sector. Trump’s tariffs aim to induce car companies to manufacture in the United States. However, American automakers rely heavily on imported parts and components — many of which become more expensive with the proposed import tariffs. Higher costs ripple through the supply chain, making American-made vehicles less competitive both at home and abroad.

Former President Joe Biden kept tariffs from the first Trump administration and introduced new ones — such as a 100% tariff on Chinese electric vehicles and a 50% tariff on Chinese-made needles and syringes. Perhaps most sharply among Biden officials, U.S. Trade Representative Katherine Tai said in her defense of tariffs in May 2024, “[The] link in terms of tariffs to prices has been largely debunked.”

The Biden administration’s policy followed a clear logic — to foster sustainable domestic manufacturing. Biden supported strategic investments like Ford’s $3.5 billion EV battery plants in Michigan and Tennessee. These efforts created jobs, stimulated EV demand through government investments and subsidies and spurred innovation in technologies like autonomous driving.

The current administration’s approach has introduced uncertainty for businesses and investors. What began as a negotiation tactic has created confusion for companies like Ford and General Motors, forcing them to reconsider long-term investments. Trump’s proposed 25% import tariffs on products from Mexico and Canada — now paused for 30 days — have left automakers scrambling to reassess strategies. Additionally, Trump’s decision to scrap EV subsidies and halt charging station rollouts threatens progress in the green economy.

Trump’s tariff plan pressures car companies to produce in the United States, but they rely on global supply chains to stay competitive. Tariffs increase production costs, already high due to strong labor unions and rising wages. Following the 2023 UAW strike, U.S. auto workers now earn significantly higher compensation than their global peers, making domestic production even more expensive.

By using tariffs as a blunt instrument, competition is stifled, reducing incentives for American firms to innovate and develop high-quality, low-cost products. The result? Consumers may face fewer choices, lower-quality goods, and higher prices — contradicting the fundamental principles of a competitive, market-driven economy.

Besides tariffs, Trump’s focus on traditional combustion engine cars contradicts the global shift toward renewable energy. Foreign firms hesitate to invest in U.S. manufacturing due to policy instability and shrinking demand for combustion engine cars. High labor costs deter companies like Toyota from building new plants in the United States, and German automakers prefer to ship sedans to America while exporting SUVs from American factories.

Trump’s reluctance to balance EVs and combustion engine vehicles risks the American automotive industry’s future. This situation is reminiscent of Kodak, which failed to adapt to digital technology. Without a commitment to EVs and battery production, the United States risks missing the next wave of technological transformation.

No single country can manufacture everything it needs. Since the 1980s, globalization has led nations to specialize, creating supply chains that span continents. Consider semiconductors, for example. Making two-nanometer semiconductors requires Zeiss lenses from Germany, extreme ultraviolet light from ASML in the Netherlands, specialty gases from Japan, materials from Applied Materials in the United States and testing equipment from KLA. Disrupting this supply chain wouldn’t bring manufacturing back to the United States; it would only drive up costs and slow technological progress.

Trump aims for America to win, but winning requires economic certainty and confidence. While tariffs can be a negotiation tactic, without a clear industrial strategy that strengthens supply chains and fosters investment, they create instability instead of growth.

A smarter approach would pair trade policy with targeted investments, allowing businesses to plan, compete and lead in emerging industries.

Tinglong Dai is the Bernard T. Ferrari Professor of Business in the Carey Business School at Johns Hopkins University. Christopher S. Tang is a UCLA Distinguished Professor and the Edward W. Carter chair in Business Administration in the Anderson School of Management at the University of California, Los Angeles. They both serve on the board of directors of the Maryland nonprofit INFORMS.