The National Security Costs of Trump’s Tariffs
Critical infrastructure is a second dimension of national security where tariffs risk doing more harm than good. The Department of Homeland Security lists sixteen critical infrastructure sectors, covering food and agriculture, water, chemicals, communications, and others. Although specific impacts depend on the sector, all now face higher costs for components.
Consider power and electricity. Most power generation technologies are expected to face cost increases of 6 percent to 11 percent, according to Wood Mackenzie. The United States imports more than 80 percent of its large power transformers, mostly from Canada and Mexico, and contracts on those imports are often linked to the price of steel. In 2021, the Commerce Department concluded that Section 232 tariffs made it more difficult for U.S. companies to produce transformer components, effectively exacerbating a risk that the tariffs had sought to address.
Tariffs could also slow the United States’ deployment of artificial intelligence (AI) infrastructure. South Korea, Taiwan, and Vietnam are key sources for semiconductors, servers, and other important data center components and face “reciprocal tariffs” of 25 percent, 32 percent, and 20 percent, respectively. Even if tariffs on South Korea and Taiwan are lowered through successful negotiations, a pending Section 232 investigation on semiconductors is expected to raise costs. In a bleaker scenario, if talks with China deteriorate, U.S. data center developers could face additional costs of more than $11 billion annually, according to Altana.
Finally, tariffs are also taking a toll on U.S. relations with partners and allies. Recent Ipsos polling across twenty-nine countries reveals a significant decline in global perceptions of the United States in response to President Trump’s economic policies. Majorities in eighteen countries, including twelve treaty allies, believe Trump’s economic policies will have a negative impact on their country’s relationship with the United States. For the first time in a decade of Ipsos’s tracking, China is now viewed more positively than the United States in terms of global influence.
This shift in public sentiment encourages elected leaders to derisk from the United States. French President Emmanuel Macron has called for European “strategic autonomy,” and is pushing for European replacements to U.S. cloud services, satellites, and fighter jets, among other areas. This sentiment is shared by other U.S. allies. “My absolute priority will be to strengthen Europe as quickly as possible so that, step-by-step, we can really achieve independence from the USA,” German Chancellor Friedrich Merz said after being elected in February.
To be sure, it is still early to measure the impact of tariffs on U.S. national security. Any benefits could well take longer to materialize, given that supply chains can take years to adjust. But in the meantime, mounting costs underscore the need for greater clarity of U.S. objectives, measurable targets, and exemptions to minimize unintended consequences.
Jonathan E. Hillman is senior fellow for geoeconomics at the Council on Foreign Relations. This article is published courtesy of the Council on Foreign Relations (CFR).This piece is part of a joint analysis by CFR trade fellows that assesses the Trump administration’s tariff policy since it announced a trade “Liberation Day” on 2 April. The full assessment was publish Monday, 7 July.
