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President Trump's "Liberation Day" on Wednesday, April 3rd, saw the US levy massive tariffs on goods from most countries the US trades with, friend and foe alike. History has shown us that these types of broad-based tariffs tend to wreck economies and disrupt world trade. Republicans used to understand this, as Ronald Reagan so well laid out in a well-known radio address in 1987. I believe that Boeing (BA) provides an excellent example of just how damaging these tariffs can be.

Boeing (BA) is one of the United State's most important companies. It directly employs nearly 150,000 and indirectly more than 1.5 million people depend on the company for their livelihoods. The 787, Boeing's newest commercial jet, is very popular and does well in the cut-throat competition against Airbus's comparable A350. Boeing has sold about 1900 to Airbus's 1500.

Below is a chart that shows the worldwide sourcing for the 787's largest parts. (There are over 2 million parts in all.) Even if the US could manufacture all these parts locally, it would take many years to create the factories and train employees to build them. In the short term, Trump's tariffs could add tens of millions of dollars to the cost of each plane, making the A350 a far better value. (They are both in the $300 million range.) And that's without even discussing the effect of reciprocal tariffs.
 

Boeing is just a single, albeit huge, company. Imagine how this effect will propagate throughout the 30 million or so businesses in the US. Will it help some? Maybe in the short term, but ultimately, these tariffs and the trade war they have triggered will most likely devastate the worldwide economy and, worse, show the countries of the world that they can shop elsewhere. It seems the Dow agrees.

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