How will Trump’s ‘Liberation Day’ tariffs affect East Tennessee? Economists weigh in

KNOXVILLE, Tenn. (WVLT) - Economists are split on whether or not President Donald Trump’s “Liberation Day” tariffs will help or hurt consumers in the long run, but they agree that it’s likely buyers will be footing the bill, at least at first.

Dr. James Lake is an associate professor of economics at the University of Tennessee. On Wednesday, Trump announced he would start charging countries the same rates for imports that they charge the U.S. in something called “reciprocal tariffs.” It’s one of two options Lake had predicted.

Previous Coverage: Trump is set to announce ‘reciprocal’ tariffs in a risky move that could reshape the economy

“One is a 20% tariff on basically everything from every country, and the alternative is to impose tariffs on other countries in a reciprocal way,” Lake said. “The idea is that whatever good we’re importing, whatever the tariff is that the other country is imposing on us, we will impose on them as well.”

Lake added that it’s more likely than not that consumers will be paying the price for importing goods.

“The foreign exporter could take a bit of a discount because they want to keep access to the US market, or they can pass on that tariff increase to the US consumer,” Lake said. “Based on what we saw in the first Trump administration, all of the evidence said that it was mostly nearly all the latter.”

Trump’s goal is to use the price hike to motivate companies to move manufacturing efforts into the U.S. Jeanne Sanderson, a representative of John S. James Co. in its Knoxville office, said removing imports from the U.S. economy’s equation is a good idea but a tough one.

“We’ve gotten really dependent on these on these imports, so bringing it back into the United States is a great idea. But doing that is a big challenge,” Sanderson said. “It’s a big hit to not only our customers, but to their customers and a lot of the people employed in this area by importers.”

Sanderson’s office has dozens of clients throughout East Tennessee, helping them plan logistics and determine costs of importing products from other countries. She said some clients are seeing major price hikes from the already-imposed tariffs.

“We have a customer who imports one particular part ... they’re looking at about three-quarters of a million dollars in additional [costs] per year,” Sanderson said. “If they can’t source it cheaper here in the United States, they have no choice.”

For the average consumer, Lake said we’ll see some items may get more expensive quicker than others.

“If we’re thinking of avocados coming from Mexico, that basically goes into the supermarket and they get sold to us straight away, so we could expect to see that price increase very quickly,” he said. “Steel, you and I don’t buy much steel, but it’s in lots of things that we buy. So businesses in the U.S. are going to be paying these tariffs and then they’re likely to pass on at least some of those to us.”

For Lake, a board member of the Midwest International Economics Group, boosting the U.S. manufacturing industry is a good idea, but he’s skeptical about the president’s approach.

“The goal of increasing and stimulating U.S. manufacturing? There are some industries where I think economists could get behind the idea of revamping and boosting the U.S. manufacturing sector, especially when it comes to things that are crucial to national security,” Lake said. “These things are just so broad that it cannot really do anything but increase the cost of doing business here in America.”