Leibowitz: Trump takes aim at trade with a tariff 'punt gun'

The tariff barrage of the last couple of months reminds me of a weapon that (well before my time) was a staple of life on the Bay—the “punt gun.”

It was a huge shotgun mounted on a “punt,” a small flat-bottomed boat. The gun fired a huge load of buckshot at a flock of ducks or geese, killing dozens or hundreds at a time. The birds would be marketed to restaurants and grocers. (Editor’s note: If you’re looking for visuals of the punt gun, the good folks at YouTube and Reddit have you covered.)

Watermen became so adept at quietly approaching the floating flocks that the death toll threatened the extinction of entire species of birds. Maryland banned punt guns for hunting migratory game birds in the early 20th century. Federal law outlawed them in 1918. Some species have made a comeback, but others (like the passenger pigeon) didn’t make it past the killing of birds and other game.

Why do the tariffs remind me of this history?

The victims of the tariffs are not only individual consumers but also businesses, large and small, that have been introduced, suddenly and violently, to a new world they are not prepared for. Steel fabricators, who make a wide variety of products used throughout American industry, are part of the victim class. But large companies (e.g., General Motors) are also in the crosshairs.

Tariffs that affect all businesses, whether or not they have the ability to adapt, are much like the punt guns of old. In an effort to prop up certain favored industries, the Trump administration concocted a formula (“reciprocal tariffs”) to punish countries that have a bilateral trade surplus with the United States. Added to that, there are enhanced and newly indiscriminate tariffs on steel and aluminum—indiscriminate because there is no longer a mechanism to exempt products that are not available from domestic suppliers.

Global commerce depends on ships. There are plenty of them around. But demand for cargo space is likely to plummet. Businesses that are not large enough to command entire ships for their cargoes (millions of such businesses exist) must deal with carriers that will rearrange their schedules to maximize efficiency. The other option: Raise prices to pass the inefficiencies along to their customers.

GM takes a hit, others will too

General Motors announced on May 1 that the tariffs announced so far would reduce 2025 earnings before income taxes by $4 billion to $5 billion.

That guidance takes into account the tweaks President Trump announced on April 29. But GM can’t take full advantage because it takes time to rearrange global sourcing, and the new provisions phase out over a few years. GM and other automakers will be encouraged to increase production (including parts production) in the United States or face potentially crippling tariffs.

That gesture toward automakers stands in stark contrast to the immediate and potentially unbearable burden on smaller businesses who, thus far, have received no consideration. The global supply chains that businesses from metal fabricators to clothing producers are in for a huge shock.

Ryan Petersen, the CEO of Flexport, a supply chain consultancy, had a compelling metaphor in an article in the Wall Street Journal. He likened the impact of tariffs on supply chains to the asteroid that wiped out the dinosaurs.

The key question is what happens next

The tariffs are intended to produce more investment and jobs in US manufacturing. But first, there will be a cosmic change, potentially wiping out millions of jobs in the short run. While administration officials will no doubt cringe at the comparison, it reminds me of the effort to undercut fossil fuels production to address climate change. Led by Democrats, the effort was to destroy fossil fuels so that renewable energy sources would have more space to grow. The result: inflation and electoral defeat in 2024.

In imposing tariffs to effect massive change in the global economy, the administration has little time, which may explain its strategy. First, the ultimate growth in American industry will take many years and will require buy-in from all major political factions. Second, the short-term pain could affect the 2026 midterm elections, which could upend Republican control of Congress. The Trump administration has to hope that markets will quickly adjust. The catch: Businesses can’t build factories in the next 12 months and rearrange supply chains that have taken years to put in place.

China, on the other hand, does not have any midterm elections to worry about. It can negotiate knowing that the pain for China’s businesses will not result in regime change. In the United States, our leaders must still answer to the people.

Editor’s note

This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.