Trump Tariffs Mean Chaos for Consumers, HBS Professors Say

Two Harvard Business School professors and economics experts said President Donald Trump’s drastic tariff increases earlier this month will face rocky implementation and are a bad omen for U.S. businesses of many sizes.

HBS Professor Willy C. Shih, whose expertise is in manufacturing and the supply chain, said members of the Trump administration “haven’t spent the time to understand the details of how trade actually flows,” instead taking a “blunt instrument” to their tariff policies.

“Maybe they don’t care — or maybe what they’re trying to do is they’re trying to bring about changes quickly, and so they don’t have time to work through the details,” he said.

According to Shih, the tariffs may lead to a rude awakening for consumers suddenly facing hiked prices for their everyday goods.

“A lot of people really don’t know where their stuff comes from, and so there will be a lot of surprises when people see price increases, because they didn’t know their stuff came from there,” he said.

Shih also said he thinks that instead of “paying attention to what strategically could be smarter and much more effective approaches,” the Trump administration may have accepted more dubious input in drafting the updated tariff policies.

“The people who get the voice in are the ones who donate a million dollars to the inauguration, or fly down and have lunch at Mar-a-Lago,” he said. “There’s a different way of influencing the administration now.”

While the U.S. may have taken a less targeted approach in their implementation of their tariffs, Shih said that China has effectively leveraged their position in response to the Trump administration’s continually increasing tariffs — only restricting export on materials most essential to U.S. manufacturing.

“When they want to respond to the U.S., they pick out very strategic metals that they’re going to ban export to the U.S. because they understand how supply chains are put together,” Shih said of China. “They understand where the sensitivities are, and they’ve been very targeted.”

HBS professor Ebehi Iyoha co-authored a study earlier this month on the Trump administration’s tariffs’ potential impacts on small to medium-sized businesses.

“I think some people have the impression that small businesses are only affected by what’s going on with trade policy to the extent that they watch the news, or maybe there’s impacts on inflation,” Iyoha said. “But one thing we wanted to capture was how tariff-exposed and trade-exposed they are on multiple dimensions.”

While Iyoha’s research was conducted before the tariffs were announced on April 2, it reported that more than 40 percent of the 1,723 companies it surveyed expected their sales to decline as a result of Trump administration tariffs.

“Net of whatever the actual tariffs are, uncertainty can be a real problem because it doesn’t allow businesses to plan for the future, to plan for growth, to plan for hiring,” she said.

While the 90-day tariff pause leaves time for countries to come to the negotiating table, it also provides small businesses with much needed time to prepare for their repercussions, Iyoha said.

“Finding U.S. alternatives takes time, stocking up on inventories — you need capital to do that. 90 days is breathing room for businesses to adjust,” she said. “Even if they go into effect in 90 days and no negotiating happens, there’s also more time for businesses to absorb the impact.”

—Staff writer Graham W. Lee can be reached at graham.lee@thecrimson.com. Follow him on X @grahamwonlee.