Author: IRPA AI Senior Analyst, Chris Surdak
On April 2, 2025, U.S. President Trump announced the implementation of reciprocal tariffs with all of its trading partners. While many pundits declare this announcement a catastrophe for American businesses, in many ways those same companies stand to benefit greatly from this move; and it is a move for which Trump may not have really had a choice. I have traveled, worked and lived all over the world and it is my experience that tariffs on imports into other countries are the rule, rather than the exception. Indeed, it is not unusual for these tariffs to be as high as 50% for high-cost items such as automobiles. Still, the question remains, will this be a positive or a negative for American companies?
While today the Federal government spends an astonishing $6.8 trillion against revenues of $4.9 trillion. The vast majority of those revenues come from income taxes, but this was not always the case. Prior to 1913 Americans didn’t pay income tax, and the U.S. government was primarily funded by… tariffs. The simultaneous implementation of the Federal Reserve and the income tax set America on a course towards explosive growth of our federal bureaucracy and our federal debt.
If tariffs were good enough to fund our country for its first 130 years, why are they perceived to be such a negative today? Largely, this is due to globalization and the de-industrialization that America has undergone over the last 40 years. American companies moved vast amounts of manufacturing offshore, to take advantage of labor cost arbitrage. The resulting lower prices allowed Americans to consume vast quantities of goods and services, while driving up our trade deficit. Economists argue that placing tariffs on these imported goods is effectively a consumption tax, and they are functionally correct. However, if the eventual goal is to bring manufacturing back to the U.S. and to reduce the trade deficit this can be viewed as a sort of public works tax, where these funds are being collected to actually grow the size and value of our domestic economy.
Our trade deficit has arguably not been that bad, so long as the dollar remained the world’s reserve currency. However, this reserve currency status is now under threat by organizations such as BRICS, and more ominously Saudi Arabia’s ending of the petrodollar deal after fifty years. With the strength of the dollar under global threat, tariffs will drive more production back to the U.S., where higher labor costs will likely be mitigated by newer technologies such as Artificial Intelligence. Increased domestic production will increase domestic tax revenues, further reducing our deficit and potentially allowing for budget surpluses for the first time in decades.
Naturally, any decisions made by Trump are the source of controversy, and his tariff strategies are certainly controversial. But, even if this is a ruse and negotiating tactic, its fair to say that the old ways of doing things in international trade have not been beneficial to America or Americans. It will be interesting to see how corporations and countries respond to this move, and whether or not it produces the outcomes that Trump and his team intend of it.
About the Author: Chris Surdak
Chris Surdak is a Senior IRPA AI Advisor and was formerly White House Chief Transformation officer, Automation & AI Practice Lead at EY & Executive Partner for Digital Transformation at Gartner. He’s an engineer, futurist, transformation executive and best-selling author, with over 30 years’ experience in technology development and deployment, digital transformation, blockchain, data and analytics and AI & intelligent automation.
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Originally posted in the IRPA AI Network — Announcements & Updates