It’s usually not a good idea to look to financial markets to assess how the economy is doing, but when it comes to Donald Trump’s tariffs announcement, it’s hard to argue with Wall Street. The market’s 4.8 percent plunge on Thursday was the equivalent of a five-alarm fire, and it continued on through Friday; within two days of Trump’s ballyhooed “Liberation Day” for the American economy, the Dow plummeted by 9.26 percent, NASDQ by 11.4 percent, and the S&P Index by 10.53 percent. Investors are clearly freaked out, and with good cause.

Historians may long debate which part of Trump’s Rose Garden speech on Wednesday was worse: the policies he actually put in place, or what his pitch for an expansive new tariffs regime told us about the process involved. To begin with the latter point, it’s clear that Trump just slapped together his grand tariff plan at the last minute, despite tariffs’ having been featured front and center in his campaign from the beginning—and indeed, an obsession of Trump’s long before his political career began. His top economic advisers did not know what was in the plan until the very last moment, with the head of his National Economic Council, Kevin Hassett, effectively proclaiming his ignorance as recently as Sunday.

The structure of Trump’s “reciprocal” tariffs has left most analysts laughing. Apparently, Trump’s team decided that the tariff a country imposed on our exports was equal to its trade surplus with the United States divided by its total exports to the United States. That may sound confusing—and it should. This number bears no relationship to the tariffs or other trade barriers that countries place on US exports. Nevertheless, it now furnishes the basis for the tariffs Trump imposed—a number that, in most cases, works out to half the figure calculated through this formula.

There was one notable exception. Trump imposed a 10 percent tariff on exports from the Heard Island and McDonald Islands. These are uninhabited islands that are a territory of Australia. Presumably, including them on Trump’s list with a 10 percent tariff was a mistake—but a revealing one that again underlines just how haphazard the process was.

Sometimes we can still get a good result from a bad process, but that does not seem likely in this case. Most immediately, Trump’s tariffs are a huge tax increase. It’s difficult to get a reliable estimate of the revenue involved, since many items will be exempted from the full tax imposed on our imports from a country, it is likely that it will work out to at least $500 billion a year—and possibly as much as $700 billion.

These numbers translate into $4,000 to $5,000 per household annually. They are much larger than any tax increases that Presidents Clinton, Obama, or Biden put on the table. Also, unlike their tax proposals, which were heavily tilted toward increasing taxes on the wealthy, Trump’s tariffs will overwhelmingly hit middle-income households.

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The logic here is straightforward. Middle-income families spend most or all of their income. The rich save a large portion of their income, thereby avoiding Trump’s taxes. Also, a much larger share of the wealthy’s consumption is spent on services like travel and restaurants, which will be less affected by Trump’s tariffs, which focus only on imported goods.

This sort of hit to pocketbooks could lead to a recession, or at least drastically slower economic growth. Also, the uncertainty associated with the tariffs, which don’t follow any clear schedule or policy frameworks, will restrain investment and further slow growth.

We can also be certain that other countries will retaliate, likely imposing large costs on the economy. Canada has already begun by banning sales of US wine and bourbon in its state liquor stores. Following Wednesday’s speech, it imposed a 25 percent tariff on US-made cars.

Other countries have been busy preparing their own acts of retaliation. China, Japan, and South Korea are preparing a joint set of responses to Trump’s tariffs. There is considerable irony in bringing together these three countries as allies against the United States. Biden had worked to unite Japan and South Korea, where animosity stemming from its World War II occupation still lingers, as allies against China. We can also count on well-considered retaliation from the European Union, Australia, and other former allies.

We can put all these items in the near-term pain category, but what about the promised Golden Age that will make it all worthwhile? Trump claims that his tariffs will revitalize US manufacturing and again make us the world’s preeminent manufacturing power.

There are more than a few problems with this story. First, more than 40 percent of our imports are intermediate goods used in the manufacturing process. By imposing tariffs on these items, we are making it more expensive to produce in the United States. This can be seen most clearly in the auto industry, where our production is thoroughly integrated with supply chains and plants in Mexico and Canada.

This is by design. NAFTA and the subsequent USMCA negotiated by Trump in his first term were intended to bring the North American economies together and make the auto industry as efficient as possible. Unwinding more than three decades of integration will add considerably to costs and make American car-making less competitive. There is a similar story in many other sectors of manufacturing.

There is also the question of whether we would be locking ourselves into antiquated technology. The Inflation Reduction Act (IRA) included subsidies and tax credits intended to bring our production of electric vehicles up to world standards. Trump seems intent on reversing as much of the IRA as he can and pushing us back toward traditional internal combustion vehicles and fossil fuel energy.

China already is producing high quality EVs that cost less than half as much as the average new car sold in the United States. It also now has batteries that can be fully charged in five minutes—roughly the same time that it takes to fill a tank of gas. EVs are likely to continue to improve rapidly in quality and fall in price.

If Trump gets his dream, perhaps we will be producing all our own cars, but they may be cars like the Trabant that was built in East Germany before the collapse of the Berlin Wall. They will be cars that no one else in the world would want, while costing us two or three times as much as what everyone else is paying. And this is before we even consider that we will be destroying the planet for future generations. This would likely be the model for Trump’s manufacturing golden age—a noncompetitive auto sector that degrades our basic quality of life while sucking up a greater share of our disposable income.

The other aspects of Trump’s vision look no better. Trump harks back to a time when a large share of the country’s workforce had good-paying jobs in manufacturing. But Trump’s jihad of tariffs cannot bring back this past.

Roughly 8 percent of the American workforce is currently employed in manufacturing. If we somehow managed to eliminate the trade deficit and get balanced trade entirely through increased manufacturing production (as opposed to increased exports of agricultural products and services), all these changes would increase manufacturing employment from 8 percent to 9 percent of the labor force. A 1 percentage point increase in the share of the workforce employed in manufacturing is not exactly transformational.

Globalized trade did hurt American manufacturing—but the main forces behind the dramatic decline in manufacturing jobs are increased productivity and a decline in demand for manufactured goods relative to services. There is a similar decline in the share of the workforce employed in manufacturing in all wealthy countries—even in places like Germany that have large trade surpluses.

The other part of Trump’s vision also collapses on closer inspection. Historically, manufacturing jobs paid a wage premium compared to jobs in other sectors. This is the story of the great booming middle class in the postwar years, whereby a worker without a college degree could enjoy a high standard of living, together with a robust pension and benefits plan by working in a factory.

But this wage premium was due to the fact that manufacturing jobs were disproportionately union jobs. In 1980, almost a third of manufacturing workers were in unions, while just 15 percent were in the rest of the private sector.

Today, the unionization rate in manufacturing is just 8 percent, while it is 6 percent in the rest of the private sector. As a result, the manufacturing wage premium has largely or completely been eliminated. There is no reason to prefer that people get employed in manufacturing as opposed to healthcare or any other sector of the economy.

Unions make manufacturing jobs into good jobs, but that is true in any sector. We need more union jobs, and unfortunately Trump and his tariffs are not likely to be much help there. (Meanwhile, of course, Trump has also sought to completely defang the National Labor Relations Board, which under the Biden administration made significant strides toward reviving the long moribund union movement.)

The point here is that there is no pot of gold at the end of Trump’s tariff rainbow. Just as he has illusions about the past, he has illusions about a potential future. His sledgehammer approach to trade will inflict much pain on the American people and antagonize our trading partners and long-time allies. It will do nothing to improve the economy in the long term—even in the most optimistic scenario.

Trump and his Commerce Secretary Howard Lutnick have talked about replacing the income tax with tariffs. While a full replacement is implausible, high tariffs can allow for substantially lowering taxes on the rich and instead visit much higher taxes on ordinary working people. In that story, Trump’s tariffs will have certainly failed to make America prosperous, but they could be very good news for the rich people who hang out around Mar-a-Lago.