President Donald Trump imposed 25% tariffs against goods coming from Canada and Mexico, the White House announced Monday, reciting Trump’s November promise that the tariffs “will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” Trump also raised tariffs on Chinese goods from 10% to 20%. Canada and China retaliated, while Mexico is waiting until Sunday.

But American businesses are not so convinced. The Dow Jones Industrial Average has lost 3.4% of its value since January 20, nullifying the post-election spike that expressed confidence in Trump’s victory. On Tuesday, President Trump took to his “bully pulpit” to make the case for tariffs in a speech before a joint session of Congress.

“If you don’t make your product in America, however, under the Trump administration, you will pay a tariff, and in some cases, a rather large one,” the president announced. On “April 2, reciprocal tariffs kick in. And, whatever they tariff us — other countries — we will tariff them.”

Trump presented two rationales for this policy change: fairness and fentanyl. The “system is not fair to the United States and never was,” he complained. “Other countries have used tariffs against us for decades, and now it’s our turn to start using them against those other countries.”

Regarding Canada and Mexico, which have shared a free trade zone with the United States since the 1990s, Trump suggested the more important consideration was that “they have allowed fentanyl to come into our country at levels never seen before, killing hundreds of thousands of our citizens. … They are, in effect, receiving subsidies of hundreds of billions of dollars.” The president did not elaborate on how U.S. fentanyl deaths subsidize the Mexican and Canadian economies.

Trump also claimed three benefits from tariffs. First, he said they boost industries like auto manufacturing and help farmers by protecting them from competition. But this claim does not pass economic muster. One reason is that most fields of economic activity rely on international supply chains. Even Midwestern farmers rely on fertilizer made from Canadian potash, Canadian gasoline, and foreign-made truck parts. Another reason is that protectionism actually hurts domestic industries in the long run by weakening their incentives to innovate — that is, finding ways to produce better goods cheaper and faster.

In his speech, Trump complained about India’s automotive tariffs reaching 110%, but those tariffs are a perfect example of a tariff that backfired. Drive through most American cities, and you’ll see a variety of foreign brands: Toyota, Honda, Nissan, Kia, Hyundai, Volvo, BMW, Mercedes, and Audi. But you probably haven’t even heard of Tata, India’s leading automobile manufacturer, because their car quality is too poor to be competitive in global markets.

Second, Trump argued that tariffs incentivize international corporations to manufacture goods domestically, such as Honda’s decision to produce its newest Civic in Indiana instead of Mexico, and Taiwan Semiconductor’s $100 billion investment to manufacture semiconductors in the U.S. Considered as a national security argument, this is a fine point to make. Wars can threaten global supply chains, so it might be prudent to make sure that everything we need to supply our military — including everything from tank assembly lines to advanced targeting computers — is somewhere we can control.

But, considered as an economic argument, this point again falls short. Trump provided evidence that steep tariffs changed the incentives companies faced, prompting them to manufacture goods in the U.S. as opposed to elsewhere. Without tariffs, these businesses found it cheaper to manufacture goods elsewhere, then import them into the U.S.; with tariffs, these businesses chose the costlier option of producing goods in the U.S. Thus, the cost (and, therefore, price paid by the consumer) might not go up by the full 25% of the tariff, but it will go up, compared to when the goods were manufactured in the cheapest possible location.

Third, Trump claimed that tariffs exert diplomatic pressure, as evidenced by Mexico’s recent decision to extradite 29 cartel figures to the U.S. This argument assumes that tariffs inflict economic harm, which is why other governments are desperate to avoid them. But this remains the best case for tariffs (or at least threatening to impose them), and Trump has already demonstrated, over the past six weeks, that threatening tariffs can extract minor but real diplomatic concessions.

Trump himself acknowledged that tariffs can inflict an economic toll, conceding that there “may be a little bit of an adjustment period,” and that “there will be a little disturbance, but we are okay with that.”

But economists worry the economic toll may be higher than Trump suspects. “Brace for higher prices on berries, bell peppers, and, gulp, beer,” warned The Wall Street Journal editors. They also predicted that prices would rise for electronics, energy, and aluminum.

“Tariffs are taxes, and Mr. Trump’s latest tariffs are estimated to be about an annual $150 billion tax increase,” they argued. “Taxes are antigrowth. That’s the message investors are sending this week.”

To lessen the economic impact of tariffs, Trump has already begun granting waivers, giving a one-month exemption to the Big Three U.S. auto manufacturers, who operate plants in Mexico. Such waivers amount to the government picking economic winners and losers — something that conservatives usually condemn. In this case, the winners are mega corporations large enough to win the president’s attention and ear, while the losers are small businesses who suffer from the rising costs of goods in general.

On Tuesday, Commerce Secretary Howard Lutnick gave hope that Trump’s tariffs on Mexico and Canada are at least open to negotiation. “The president’s listening because you know he’s very, very fair, and very reasonable. So, I think he’s going to work something out with them,” he said. “It’s not gonna be a ‘pause,’ — none of that ‘pause’ stuff — but I think he’s gonna figure out, ‘You do more, and I’ll meet you in the middle some way.’ … Somewhere in the middle will likely be the outcome.”

Later that night, Trump was more bullish about taxing foreign imports. “Tariffs — it’s a beautiful word, isn’t it?” he asked. That’s certainly the minority opinion. Most policymakers and economists consider them terrifying.