President Donald Trump unveiled his “Liberation Day” tariffs this week, raising questions about how they will impact the U.S. economy, jobs, and Americans’ budgets. Much analysis of the effect “reciprocal tariffs” will have ignores the greatest rule of economics: Consider unseen consequences.

President Trump announced his executive order on tariffs Wednesday afternoon. The president claims authority to regulate trade based on the International Emergency Economic Powers Act of 1977, which allows the president to “regulate” imports during a declared national emergency.

Every nation in the world would face a minimum of 10% tariffs, with China paying a combined tariff of 54%. For instance, the U.S. has an $11.9 billion trade surplus with the United Kingdom, yet the minimum tariff rate of 10% now applies. The policy applies the highest tariff rate, 50%, to the impoverished African nation of Lesotho. Products from Vietnam will face a 46% tariff. (You can see the full list country-by-country here.)

Although President Trump promises to enact “reciprocal tariffs” charging nations half of the rate they charge the U.S., the new policy actually measures the trade deficit — the difference between the amount of goods we import from a country and the amount we export — then cuts it in half, even if the difference is not due to tariffs. The U.S. Trade Representative clarified his staff began “computing the tariff level consistent with driving bilateral trade deficits to zero.” (Emphasis in original.) The “reciprocal tariffs” are meant to compensate for “tens of thousands of tariff, regulatory, tax and other policies,” such as currency devaluation (which lowers the price of exports while raising the cost of imports).

How will this impact prices, jobs, and the overall economy? It’s complicated. As a baseline, the Tax Foundation estimates the Liberation Day tariffs “will raise $1.8 trillion in revenue over the next decade and shrink US GDP by 0.5 percent” — a $420 billion net gain. But they will reduce after-tax income by 2.1% and destroy 669,000 jobs. Yet this does not paint the full picture.

Reciprocal Tariffs: The Bad News

First, tariffs will raise some prices, hitting the poor and middle class the hardest. Price hikes will hit U.S. manufacturers, since “more than 61% of U.S. imports are inputs for U.S. firms,” said economist Mark J. Perry. Higher prices can mean more inflation, especially when coupled with mass deportations of illegal immigrants, who made up the core of the nation’s low-wage workforce, and exuberant economic growth. But tariffs mitigate against inflation by raising prices and reducing demand. Finally, foreign nations will retaliate, hurting jobs and reducing global economic output.

That’s the bad news — but it’s not as apocalyptic as the president’s frequently refuted critics imply.

Reciprocal Tariffs: The Good News

First, every nation wants access to U.S. markets. Further, our trade imbalance means other nations stand to lose more from a trade war. And tariffs have already driven some reshoring of industry.

Additionally, President Trump’s pro-growth policies of deregulation, tax cuts, and spending cuts can minimize the harm of tariffs. The first Trump administration’s deregulatory efforts saved the productive economy $155-$164.7 billion. This administration multiplied the goal by five.

President Trump plans to extend the 2017 Tax Cuts and Jobs Act, eliminate taxes on tips, Social Security benefits, overtime, and all income below $150,000 a year. Getting rid of taxes on overtime pay would generate an additional $700 billion in the productive economy over 10 years, according to the Tax Foundation. Ending taxes on Social Security benefits would free up more than $1.6 trillion over 10 years and create the equivalent of 64,000 full-time jobs (although the proposal also has unforeseen consequences). Further, he favors slashing the corporate tax rate from 21% to 15%, which the Tax Foundation estimates would increase GDP and average wages by 0.4%, and create 93,000 jobs.

The combination of selective, short-term tariffs coupled with robust tax cuts and deregulation spurred white-hot economic growth during the first Trump administration, which saw the lowest unemployment rates for black, Hispanic, and Asian-American workers recorded until that time, and women had the lowest unemployment rate since 1953 (speaking of events with unforeseen consequences). Middle- and working-class Americans saw their net worth increase 47%, “an annual rate 15 times higher than the average growth seen under the three prior administrations’ expansion periods,” the first Trump administration noted with pride in January 2020. (The net worth of the top 1% actually fell until the COVID lockdowns.) Some 2.3 million Americans entered the workforce. The labor force participation rate enjoyed a modest-but-real increase before the pandemic — something virtually unheard of this century.

The Soviet Union collapsed under the squeeze of overspending, imperial overreach, an endless war with Afghanistan, and a stagnant economy. If President Trump addresses these root causes of national decline, he will make America stronger for it.