By Brooke Thomson
President & CEO

The ill-considered and constitutionally dubious global tariffs imposed today by the Trump Administration will cause significant harm to Massachusetts businesses, which export some $77 billion worth of goods each year to 210 markets globally. These exports support one of five jobs throughout the commonwealth. AIM and its 3,400 member companies urge the administration to reconsider an action that will impede our collective efforts to expand the state’s economy.

President Donald Trump unveiled sweeping “discounted reciprocal” levies this afternoon on a day he dubbed “Liberation Day.” The president announced that the US will impose tariffs equal to approximately one-half of the total tariffs and non-monetary barriers maintained by each country on American goods and services. China will face a 34 percent tariff, while the European Union will be 20 percent. Japan will be 24 percent and India 26 percent.

A universal baseline tariff of 10 percent will apply to all countries.

Canada and Mexico, which have been targets of Trump’s previous rounds of tariffs and are the United States’ top trading partners, were not mentioned for additional tariffs in the president’s chart or in detailed country-by-country documents handed out to reporters in the Rose Garden.

The president previously imposed tariffs on aluminum, steel and autos, along with increased tariffs on all goods from China. A 25% tariff on global automotive imports is set to go into effect on Thursday.

The administration believes that these trade actions are a way to rebuild America’s manufacturing economy, or, at the very least, get a better deal from other countries.

The threat of tariffs, which took shape a month ago with duties imposed and then suspended against Canada and Mexico, have left both financial markets and individual employers in a state of uncertainty. The February AIM Business Confidence Index suffered its largest monthly decline since the onset of the COVID pandemic, US factory activity contracted in March for the first time this year and the Institute for Supply Management’s manufacturing index declined 1.3 points last month to 49.

One Massachusetts company told us yesterday that a $1 million contract set for March was cancelled with less than 48-hours notice. Another manufacturing company estimates that tariffs will increase costs by $2 million – all of which would be passed on to customers. Still other companies who source raw materials from overseas don’t know how to price their goods. Several companies report concern about fuel costs since so much of their diesel comes from Canada.

Massachusetts exports in 2024 included $33.5 billion worth of products such as semiconductor manufacturing equipment, vaccines and medical/scientific instruments. Top destinations for these products were China, Switzerland, Mexico, Canada and the United Kingdom. The remaining exports were services. Product exports represent 4.8 percent of Massachusetts GDP.

The commonwealth also exported $42 billion worth of services, according to data compiled by the US Chamber of Commerce. Most services export growth has been driven by digital trade, which is allowing more Massachusetts companies to reach customers abroad more easily.

The tariffs may be based on authority the president does not have.

Mr. Trump has invoked the 1977 International Emergency Economic Powers Act (IEEPA), which gives a U.S. president sweeping powers to regulate the economy during wartime or another emergency caused by a foreign threat. The law essentially grants a president extraordinary economic powers “to deal with any unusual and extraordinary threat” if he “declares a national emergency with respect to such threat.”

Historically, presidential authority under the IEEPA has been used to impose an array of sanctions that hit U.S. adversaries directly, such as export embargoes and the freezing of foreign assets. But it has never been used to raise tariffs on imports into the United States—which U.S. importers and ultimately consumers, not the targeted countries, pay. Nor has the law ever been used to punish allies and partners, such as Canada and Mexico.

Tariffs also fail the fiscal test.

President Trump has also repeatedly talked about replacing taxes with tariffs. But the U.S. government raises about $2 trillion from individual and corporate income taxes. In 2024, the United States imported $4 trillion of products, meaning tariffs would have to be extremely high to replace tax revenue.

Calculations by economists at the Peterson Institute for International Economics suggest that tariff revenue could peak at about $780 billion annually with a 50 percent tariff on all imports. After that, the amount of revenue would shrink. That’s because when tariffs reach a certain level, consumers tend to stop buying imported products, meaning the revenue they generate decreases.

Will tariffs cause a large-scale re-shoring of manufacturing to the United States? President Trump’s 2018 tariffs, which were largely maintained by the Biden administration, did not accelerate investment in domestic manufacturing and had a negative effect on U.S. manufacturing jobs overall.  Furthermore, any re-shoring of manufacturing re-shoring of supply chains is unlikely to benefit Massachusetts and other high-cost states.

The most effective way to build the manufacturing base of Massachusetts is to provide domestic manufacturers fair access to overseas markets anxious to buy the technologically sophisticated produces in which we specialize. Open markets represent the surest path to job growth for the commonwealth and the rest of the nation.