I cannot in good conscience write this week's column without commenting on the enormity of the U.S. government’s newly imposed tariffs. This move will impact local businesses, the local economy and our community in many expected and unexpected ways — mostly negatively, certainly in the short term. With the potential for reciprocal tariffs by other nations, not only on American-made goods, but also in our services sectors such as banking, insurance, digital and technical where we’ve maintained large trade surpluses over the years, we’ve got ourselves an escalating trade war with a totally unknown outcome. This is the time to double down on remaking our local economy to be more resilient.

Aside from a potential small bump in consumer spending because of panic buying, there’s already anecdotal evidence that people and businesses over the last month have started to slow down their spending out of caution. With consumer sentiment turning sour, which represents 68 percent of the US’s gross domestic product (GDP), the chances of a recession (or worse) have increased dramatically. That will mean rising layoffs and unemployment, wage stagnation, rising deficit and lower retail and industrial production. There’s also the decline in the stock market and home sales (but housing prices continue to rise). The biggest fear according to many economists is the dreaded “stagflation” — when the economy slows down, but prices continue to rise anyway — last seen under President Gerald Ford in the mid-1970s.

Tariffs are typically charged as a percentage of the price a buyer pays a foreign seller. In the United States, tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the country. The money from tariffs, paid by American companies (and mostly passed on to consumers), goes to the U.S. Department of Treasury and enters the general affairs budget. From there, it can be used essentially for anything. Last week's tariffs could increase revenue by more than $100 billion per year (out of $4.9 trillion in total U.S. revenue collected). If made permanent, it could raise more than $1 trillion by 2035 according to the nonprofit, nonpartisan Committee for a Responsible Federal Budget.

Who gains and who loses from a tariff? Domestic producers usually gain due to increased sales and potentially higher profits, while consumers and foreign producers generally lose due to higher prices and limited market access. But with reciprocal tariffs by other countries on U.S. goods and services, there will likely be few winners. And while tariffs will negatively impact all income levels to some degree, it will disproportionately hit the poor as they don’t have as much discretionary income to cushion the blow.

Why is our president increasing tariffs all at once? And so dramatically? Who can really say with confidence what’s going on in our president’s head? But he states he wants to reduce the trade gap and check the rise of China as a hyper-competitive trading power that heavily subsidizes its own companies. This has resulted in the hollowing out of American (and European) manufacturing capabilities. It’s hard to easily put into perspective how massive China’s gains have been over the last 25 years in manufacturing. Since China joined the World Trade Organization in 2001, its manufacturing exports rose from just 6 percent to 30 percent of total global trade, and since Covid, it has grown even more. And many economists are worried about China’s new massive investments to further expand its manufacturing capacity as part of a “Made in China 2025” initiative. Also, China increasingly skirts rising tariffs on its good by using other nations like Mexico and Vietnam for final manufacturing assembly. All while its government cruelly refuses to increase spending on its own citizens’ social safety nets or encourage more domestic consumption. It’s a predatory form of mercantilism.

But aside from just beating the pants off of the West in global manufacturing, national security has also become a concern. One lesson learned during the pandemic that President Biden recognized was that our supply chains are much too vulnerable to disruption. As such, the nation needs to bring home some key businesses and industry. And with the rapid rise in automation, AI and robots, labor costs as a percentage of operational overhead are shrinking in the U.S., making some domestic manufacturing more competitive. But while I applaud the idea of re-shoring, the manner in which our president is doing so is incredibly disruptive and painful, and done with little explanation or preparation. Maybe that’s part of his “strategery” — keep ’em guessing and off-base. But as I said, who can really say …

In recent periods of economic turmoil such as the Great Recession and Covid, the federal government printed more money, handed out checks and grew social benefits to cushion the economic blows. This time, even though the current crisis is self-inflicted by President Trump’s policy, Washington, D.C. doesn’t appear to be in a mood to spend or send money to the states. This will put New York in increasingly dire financial straits as federal funds and sales tax revenues fall. For those of us who are a bit older, we’ve seen what happens when New York State has to make painful cuts in its budget. It wasn’t pretty. Unlike the feds, a state cannot print more money, so it must either raise taxes and fees, cut spending or float bonds.

The same goes for local governments as well. Recently released data shared by County Comptroller March Gallagher shows that Ulster’s sales tax payment received for February was down 26 percent. If numbers like this hold, our communities will be confronted with some tough budgetary decision-making.

I know for many it may seem too early to think about local economic planning — as this past Saturday’s “Hands Off” protests demonstrate. Many of us now want to let out a primal scream in protest. It’s certainly cathartic. But it doesn’t address how local economic policy can best respond to increasingly erratic leadership. In particular, how can we make our community more economically resilient in the face of growing global uncertainty?

To build resilience, Kingston and Ulster would be wise to invest more in local infrastructure, encourage business and workforce development, nurture innovation and entrepreneurship and streamline zoning and permitting. We are doing some of this, but the investments are relatively puny. While we can abhor the federal policies, we can at the same time invest in ways to capture select manufacturing that may return to the United States. Ulster used to be full of small manufacturers. And generally, the manufacturing sector pays better than the hospitality and agriculture industries. Our proximity to big markets in the Northeast positions us well for not only food-to-table agriculture and tourism, but also small-batch production focused on quality, customization and flexibility.

Small-batch production involves manufacturing goods in limited quantities, making it suitable for startups, emerging brands and businesses prioritizing unique, high-quality products. It’s also a great match with our vibrant arts community. The arts add creativity, innovation, and aesthetic appeal to products and processes, while manufacturing provides the means to create and scale artistic endeavors. We see these kinds of arts-and-small-manufacturer collaborations happen more often in Midtown Kingston, and it should be encouraged.

Much of today’s small-batch manufacturing offers higher-paying jobs and can be done in environmentally responsible ways. While it will not solve the immediate real-life pain resulting from tariffs and its economic fallout, we can proactively work towards building greater resiliency and economic diversity that better withstands shocks like the kinds we’re getting today.

Raleigh Green is a local business owner specializing in marketing communications consulting and services. If you enjoy this column, please "like" it on social media and share online. The opinions expressed in this article are those of the writer; they do not necessarily reflect the opinions of the Kingston Wire Editorial Team.