Support for Donald Trump’s second term has weakened as voters increasingly blame his policies for economic pain. Approval ratings have trended down since he returned to office, and recent polls show growing dissatisfaction: more Americans report the economy has worsened under Trump than under Biden, consumer sentiment has slid back to levels seen during the 2022 inflation spike, and core supporters report record levels of disapproval. Key dips in sentiment and approval tracked the recent government shutdown and the administration’s high-profile tariff announcements, suggesting policy choices are driving public concern as much as headline economic statistics.
Tariffs are a central part of this story. Since May, reports and industry surveys have tied slowing manufacturing, longer supplier delivery times, and falling new orders to rising trade restrictions. Manufacturers, according to the Institute for Supply Management and news coverage, cite tariffs as a major constraint: supply chains are getting clogged, deliveries are delayed, and input costs have risen. Agencies such as Moody’s describe parts of manufacturing activity as recession-like, and interviews with firms consistently point to tariff-related pessimism.
The reason is straightforward and familiar to supply-chain managers: many imports are not finished consumer goods but intermediate inputs—steel, electronic components, auto parts—that factories use to make final products. When those inputs face tariffs, production costs rise, deliveries slow, and output falls. That harms employment in manufacturing and related sectors, and it also means consumer-targeted measures like rebate checks won’t fully restore purchasing power if the goods people want to buy are scarcer or more expensive.
Public finance theory explains why taxing intermediate goods is especially damaging. Classic results from Diamond and Mirrlees show that if a government wants to raise revenue or redistribute income while minimizing distortions, it should avoid taxing the inputs firms use to produce other goods. Taxes on intermediate goods shrink the economy’s ability to create the overall output that can be redistributed, so it is generally better to tax final goods or factors of production. Later work has relaxed some assumptions but largely upheld the core insight: levying broad taxes on intermediate inputs is costly for production efficiency.
The U.S. economy reflects this logic in practice. Income and payroll taxes hit labor and capital; business tax systems typically allow deductions for expenses so firms are not taxed again on intermediate purchases; and consumption taxes like VAT are structured to avoid cascading taxes on business-to-business transactions. By contrast, sweeping tariffs that hit a large share of intermediate imports effectively reintroduce a harmful tax on production inputs.
Roughly half of U.S. imports are intermediate goods, and the current tariff program covers many of those items. Even if effective rates have been lower than some threatened levels and exemptions have been granted, the cumulative effect—higher input prices, disrupted supply chains, and delayed projects—has been measurable. Factory construction booms have cooled, auto production has swung from growth to contraction, and jobs in manufacturing, construction, and transportation have softened after prior gains.
Some economists concede limited cases for modest, targeted tariffs when policymakers lack better tools to protect displaced workers. Recent theoretical work suggests that when income taxes are the only redistribution instrument, optimal tariffs could be slightly positive. But the magnitudes involved are tiny—fractions of a percent—nowhere near the multi-percentage-point, economy-wide tariffs that have been used.
The political fallout follows the economics. Tariffs meant to shore up manufacturing have instead raised costs, slowed production, and trimmed jobs in the very industries the administration vowed to help. Voters see these effects in their wallets and in shrinking job markets, and their rising frustration has translated into lower presidential approval. Dismissing economists and well-established public-finance lessons has made this outcome more likely.
A different approach could have achieved similar distributional aims with fewer distortions: narrowly targeted subsidies, wage insurance, retraining, or modest, temporary protections for specific, demonstrably harmed workers would have limited collateral damage to supply chains. The broader lesson for any administration is clear: taxing intermediate goods is unusually harmful to production. Policies that ignore that principle risk shrinking the economic pie before redistribution, producing worse economic outcomes and predictable political backlash.
