The Trump Administration’s unilateral imposition of tariffs, tax cuts for the rich and elimination of cabinet departments and federal employees invite U.S. economic calamity.

The trade war tariffs will neither reduce U.S. trade deficits nor bring about a renaissance in American manufacturing. Federal government revenue generated by these tariffs will cover only a fraction of the revenue lost to tax cuts proposed in the federal budget bill. The oppressive, indiscriminate federal workforce reductions brought about by the Department of Government Efficiency raise deep concerns about the delivery of immediate critical health, safety and welfare services and longer-term agency function. One would be hard pressed to craft a more irresponsible economic policy. It punishes the poor today and future generations of Americans.

The Trump fiscal plan is corrosive for the U.S. as a whole and disastrous for Alaska in particular. Consider each of these fiscal plan elements in turn:

Trade war

The Trump administration’s heavy-handed tariffs on steel, aluminum, automobiles and other raw materials and finished goods are illegal and will raise the costs of imported cars, equipment, machinery and supplies to American manufacturing firms and ultimately result in higher costs passed through to intermediate goods and end-product consumers. In general, a tariff on imported goods and services amounts to a sales tax levied on domestic, U.S. businesses and consumers. It’s a highly regressive form of taxation, hitting low- and middle-income households the hardest. Right now, the blended ‘sales tax’ rate on all imported goods stands at 17.8 percent, up 15 points from its pre-2025 levels. Since imports are more than 11 percent of GDP, it’s a huge pending inflation uptick to consumer prices, which can already be seen in the recent, steep decline in consumer sentiment. Beyond this, the chaotic, haphazard implementation of tariff policy is acutely counterproductive to business investment because trade policy predictability is the cornerstone of well-managed fiscal policy. This is why federal law does not authorize the president to impose tariffs without congressional approval.

For Alaska commerce, which lies at the very edge of the global logistics, the impact from this hurtful cost structure and supply chain disruption has already fueled business network chaos and American brand destruction. Other damages include 1) weakened crude oil price impacts on state royalty and tax revenue, on Permanent Fund earnings, and on oil company capital project optics; 2) time-critical Alaska seafood market disruption from China and other Asia-Pacific counter-tariff policies; 3) falling tourism bookings and 4) disastrous cost increases on the already budget-stressed Alaska LNG energy lifeline. The ultimate outcome of this trade war for Alaska and American business is higher structural inflation, investment contraction, business slowdown, rising unemployment, climbing interest rates, and widening housing and stock market implosion – all tipping the U.S. and especially Alaska toward a recessionary downward spiral. And all entirely unwarranted and unnecessary.

Federal budget and tax cuts. The proposed “big beautiful” budget bill passed on May 22 by the House of Representatives will deepen federal debt to $40 trillion or to 125 percent of GDP by 2035. In response to this nightmare scenario, Moody’s rating agency lowered the U.S. government’s credit score. The U.S. bond market reacted; yields on medium- and long-term US Treasury bonds spiked yet again. According to CBO estimates, the proposed tax cuts will lower after-tax income to the bottom 40% and raise after tax-income to the richest 10%. In addition to tariff shocks, Alaska household disposable income and business earnings will be impaired by the combined impacts of regressive income taxation and higher interest costs.

Beyond these disturbing policy and market dislocations, the proposed budget bill imposes unconscionable safety net impairment to America’s most vulnerable population, including added work requirements and cuts to healthcare spending ($715 billion), SNAP/food stamps ($300 billion), and Medicare ($500 billion). Alaska’s 279,000 Medicaid recipients (including 109,000 children) would face about $3 billion in uncovered healthcare costs for which no safety net alternative exists.

Department of Government Efficiency actions. Over the past 90 days, DOGE has carried out indiscriminate layoffs of about 280,000 federal employees and contractors without consideration for organizational structure and job function; all in the quest to save money by eliminating waste. The layoffs have extended beyond federal agencies, affecting contractors and nonprofit organizations that rely on federal funding. The ripple effect has led to additional job losses, with over 4,400 positions eliminated in related sectors.

Alaska’s 15,000 federal employees, including about 8,000 military, play a disproportionate role in our economy, both in public service delivery and in disposable income. Alaska’s federal workforce serve in mostly year-round jobs, are among the state’s highest paid workers and, critically, they spend locally. Setting aside diminished quality-of-life, public safety and security, a 15% reduction in Alaska’s federal workforce — well below DOGE 20-30% federal reduction target — would result in direct, devastating $250 million in lost wages to local business spending, based on $1.6 billion in reported Alaska federal workforce earnings in 2024 from Alaska Department of Labor and Workforce Development. Add to this further indirect, additional multiplier losses that would follow in step.

Taken together, the Trump Administration’s tariffs and tax cuts will cause economic chaos and destruction. So far, global tariffs — even those recently scaled back — have resulted in trillions of dollars in U.S. capital market destruction, enormous financial market instability, and the promise of rising inflation with slowing economic growth. President Trump’s faulty perception of tariff ‘medicine’ to fix bilateral trade deficits and to generate new federal revenue is analogous to a physician prescribing heavy chemo doses to a perfectly healthy patient. Furthermore, giving gigantic tax cuts to the wealthiest households is like to prescribing steroids to the now-ailing patient — due entirely to unnecessary and irresponsible tariff poisoning! And DOGE’s reckless efforts have brought disruption and dysfunction to all levels of the federal government’s responsibility for: protecting individual rights, overseeing infrastructure and commerce, and providing a safety net lifeline.

Bottom Line: The Alaska congressional delegation must continue to build the congressional coalitions to accomplish three critical things:

• Assert congressional tariff-making authority and oversight to reign in the president,

• Restore congressional authority for federal program formation and spending, and

• Craft a budget that protects the safety net and keeps guard rails on federal deficit expansion.

Will Nebesky is an economist and pilot who lives in Anchorage.

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