“Tariffs are taxes,” the economist said.
“Tariffs win wars,” the freight executive said.
Between those two lines stretched the argument that defined “Navigating Tariffs: From City Hall to Global Markets,” the Nov. 3 panel at the University of Tennessee at Chattanooga.
Co-hosted by the Scott L. Probasco, Jr., Distinguished Chair of Free Enterprise and the Chattanooga Chamber’s International Business Council, the 60-minute discussion turned what could have been a dry policy review into a spirited exchange over who really pays for tariffs, what they do to jobs and prices and whether the United States can afford not to use them.
Moderated by Adam Myers, the Chamber’s vice president of economic development, the panel brought together Dr. Claudia Kramer of UTC, Chattanooga Mayor Tim Kelly, FreightWaves CEO Craig Fuller and attorney John Scannapieco of Womble Bond Dickinson. Each came armed with data, anecdotes and sharply different instincts about how trade policy should work.
It’s voluntary exchange
Kramer set the baseline with the clarity of an economics professor.
“We start talking about the benefits of trade during week two of every principles class. We say it’s voluntary exchange. It’s a positive-sum game.”
Trade, she continued, doesn’t change its logic because borders appear.
“If you’re selling something I think will benefit me and it’s at a price that’s less than what it would cost me, then we exchange. That’s true whether it’s with your neighbor or someone in the country of Georgia.”
Kramer then cut through the political fog.
“Oftentimes when the public hears about tariffs, they don’t realize we’re talking about taxes. A tariff is a tax on imported goods. And it’s not paid by a foreign country – it’s paid by the consumer.”
Measuring what’s known as the pass-through rate – how much of a tariff imposed on producers or importers is passed on to consumers through higher prices – economists estimate that any tariff is 80 to 100% passed on to the domestic consumer, Kramer explained.
She then rattled off the numbers from the last major wave.
“Trump’s first-term tariffs raised about $80 billion in revenue, but they cost us $100 billion in inefficiencies. So, on one hand, yes, the government collected more, but we paid more. That’s a net loss.”
When tariffs raise prices, she said, both households and firms make second-best decisions.
“Maybe you were going to buy a car and now you’re holding off. Maybe a business delays expansion. In economics, we call that deadweight loss. It’s the foundational argument of supply and demand.”
A drag on the economy
Myers turned to Mayor Kelly for a local government perspective. Kelly didn’t mince words.
“I’ve talked to a lot of people in the mayor’s office and around industry, and to sum it up, tariffs have had a chilling effect.”
Tariffs are a drag on the economy, Kelly continued, but it would be one thing if they were predictable and fixed. The real issue, he said, is that no one seems to know from one day to the next what’s going to happen – and markets hate unpredictability.
“So it feels like the car is pulled over on the side of the road with the blinkers on.”
Kelly’s metaphor landed. For a city that depends on a sales-tax base, any slowdown in consumption or investment ripples through budgets.
“It’s not political,” he added. “Tennessee is extremely sensitive to the economy because it’s a sales-tax-driven state, and it’s No. 3 or four in the country for foreign direct investment. The stakes are real.”
‘Uncertainty is poison’
From the global vantage point of FreightWaves, Fuller painted a picture of an industrial recession hiding beneath steady retail numbers.
“We track freight transactions in near real time,” he said. “We can see what’s moving and what isn’t within 24 hours. Trucking is the predominant mode of freight movement in the U.S., so when trucking slows, you know something is happening.
“What most people don’t realize is that year-over-year trucking volumes are down 17%. It’s not uniform. The short-haul freight that feeds retail and e-commerce is flat. That’s why the Fed thinks everything is fine. But the long-haul side – manufacturing, autos, housing – is down 30% year over year. That’s a one-third deterioration of volume across our economy.”
Fuller paused and then added, “This is the worst freight market we’ve seen since the financial crisis.”
He then said the slowdown isn’t only tariffs.
“The Federal Reserve has been so worried about inflation that it’s refused to cut interest rates faster. Washington is looking at stock prices and thinking everyone is doing great. Meanwhile, UPS just announced 48,000 layoffs – the first major reduction in force in its history. Transportation stocks are at 10-year lows. Companies have billion-dollar projects just sitting on the sidelines.”
Still, he tied part of the pain to tariffs’ unpredictability.
‘If we knew the rate, we could price it in. Uncertainty is poison.”
It messed up the math
Scannapieco, who advises companies on international trade and investment, took the microphone next.
“Uncertainty is the biggest challenge. If you’re importing components or raw materials, how do you plan long-term when you don’t know if the tariff next month is 5 or 50%?”
He illustrated with case studies.
“I was doing a speech in California, and the pistachio growers said, ‘I can’t sell to Canada, I can’t sell to China and I can’t fix my water system because I don’t have the money.’ This isn’t a short-term issue. Long-term damage is taking place.”
Then he told a story from one of his own clients who manufacture a product in China.
“They’d figured out how to bring it here and sell it for 30% less, and they were starting to win market share when the tariffs – which ranged from 170% down to 34% – totally messed up the math. They spent all this time and money, and now their company is in crisis.”
Fuller jumped in to agree that the cost of time was just as punishing.
“Even if Trump had said ‘50% forever,’ everyone would be fine,” he said. “We’d know how to budget. It’s the constant shifting that kills you.”
To make the point local, Fuller cited Chattanooga’s trucking sector.
“A Section 232 tariff was just put on heavy-duty trucks. Knight-Swift buys 8,000 trucks a year. That tariff raises the price by $50,000 each – that’s $400 million in extra cost. Covenant Transport orders at least 1,000 trucks a year. That’s another $50 million. Those orders were made years ago. The uncertainty is the problem.”
Kiss the ring
Scannapieco offered a second story – this one about the slow-moving Section 232 investigation into pharmaceuticals.
“The investigation was done months ago, and we were supposed to get an announcement in August. We haven’t, because individual companies are lobbying the White House for exclusions – ‘Hit my competitor, not me.’ It’s turned into crony capitalism. I grew up in Boston; we called it ‘kiss the ring.’ That’s what’s happening. And from an economist’s perspective, it distorts markets and messes things up long-term.”
How could that not be inflationary?
Kelly reentered the conversation with a practical question.
“The thing we haven’t talked about is inflation. I’m not an economist, but how could tariffs not be inflationary? Just when we were starting to get costs under control, if a company’s paying another $40 million for its trucks, it has to pass that on to the consumer.”
Myers picked up on that theme.
“This administration has said tariffs are a tax on foreign countries, but it’s really a tax on the businesses producing the goods. Ultimately, who’s paying the cost?”
Kramer didn’t hesitate.
“A good way of thinking about it is the seen versus the unseen. You can see the 1,000 steel jobs saved, but you don’t see the 75,000 jobs lost downstream when every product using steel gets more expensive.”
She went further, explaining that imports and exports move together – if the nation imports less, it also exports less, which means export-oriented industries take a hit as well. On average, she said, wages fall about 5% under higher tariffs, and GDP is projected to decline roughly 6% a year if the current policies persist – figures she described as massive shifts that alter living standards and, ultimately, quality of life.
Still, Kramer granted a sliver of agreement to Fuller.
“I’d take one rate over policy switching back and forth. However, living in a pro-tariff world is incredibly costly. Anything outside free trade imposes a significant cost.”
We have a national security problem
Fuller took that opening to state his position.
“I’m a free-market capitalist by nature, but we have a national security problem. We don’t produce anything here anymore. The U.S. military imports a lot of the products we use in our own weapons. That’s an issue.”
Fuller traced the logic back to history.
“If you’ve studied wars, you know supply chains win wars. Look at the American Civil War. The North overran the South because the North had the supply chains. Right now, we’re dealing with an adversary (China) that has a 50-year plan to rival us. They’ve been executing that plan for decades. If we don’t change how we source goods, we’ll be at their mercy.”
That, he said, is why he supports tariffs – if they’re certain and consistent.
“A consistent tariff forces CEOs to think differently about where they produce. Without it, there’s zero incentive to move supply chains out of China until there’s a conflict – and by then it’s too late.”
Do deals with our friends
Scannapieco pushed back again, this time on geopolitical grounds.
“Craig’s right about the national security issue, but I’d rather do deals with my friends. Why can’t we do deals with Chile or Australia? Both are allies, both have the resources. For whatever reason, this administration doesn’t believe in that. That’s why I push back on tariffs – they’re more harmful long-term than working with our friends.”
He also argued that tariffs don’t touch the real distortions, including subsidies and currency manipulation.
“Tariffs don’t fix those things. Raising prices in China isn’t going to change China.”
Scannapieco pointed to rare earth materials as an example of how complex the problem can be. The United States has deposits of these critical minerals, he said, but processing them carries heavy environmental costs that few communities are willing to accept. So, he argued, the U.S. should strengthen trade partnerships with allies that can mine or refine them responsibly.
Fuller partially agreed. He said the rare earth dilemma illustrates the trade-off between cost, security and sustainability.
“You’re right about the environmental cost of rare earth mining,” he said. “Nobody wants to do it here. But that’s why you need to make Chinese goods more expensive and at the same time do those deals with Mexico or Australia. If I’m running a company, no matter how patriotic I am, if the Chinese price is 20 or 50% lower, then I’ll buy from China.”
We live in a different world
Scannapieco then broadened the lens.
“Trump’s been saying the same thing since the eighties. He’s living in a world that no longer exists. We live in a globally interconnected economy. If I want to buy something today, I don’t need a salesman or a catalog, I can type it into my phone and get 10,000 options from all over the world.”
Scannapieco then said the pandemic underscored the need for more regional supply chains that keep production closer to end markets. Even so, he argued, tariffs have done more harm than good for the U.S. economy. In his own practice, he’s seen multiple foreign direct investment projects collapse because the numbers no longer worked under the new tariff regime – cancellations that, taken together, cost about 1,000 potential jobs.
We worship the altar of good economic policy
Kelly closed the local loop.
“Being a city in Tennessee, we have two sources of revenue – sales tax and property tax. From a pure economic standpoint, I’ll be damned if I can figure out how tariffs wouldn’t be inflationary. But to the extent we can insulate ourselves, the better off we’ll be.”
He said Tennessee’s broader economic philosophy still works in its favor.
“We have a very attractive state. There’s a reason the Economic and Community Development office in Nashville looks over everybody else’s office. We in Tennessee worship the altar of good economic policy. Hopefully, as the dust settles, we’ll figure out a way forward that works for us.”
Myers added that the uncertainty might also accelerate an inevitable shift.
“Even in light of all this, we’re seeing opportunities. It’s giving us a chance to look at how we pivot to knowledge economy jobs – finance, insurance, sectors less tied to importing and exporting.”
Kelly agreed.
“We were always going to need to pivot to a knowledge economy. Maybe this forces us to do it faster.”
It hasn’t hit yet
As the discussion wound down, Myers asked Kramer why consumer price indexes hadn’t spiked following the implementation of tariffs. Her answer was simple.
“Some of it is timing. Stores like Walmart still have inventory, so it hasn’t hit the supply side yet. But Craig is right – it’s coming. And part of it is behavior. We adjust in subtle ways.”
Fuller agreed, saying retail freight data often masks what’s happening underneath.
“The consumer side looks flat, but the industrial side’s falling out from under us. It’ll show up eventually.”
Different lenses, same warning
When the moderator finally thanked the panel, the audience had heard four clear perspectives.
Kramer made the economic case that tariffs are taxes that burden consumers and reduce efficiency. Fuller argued that they are blunt but necessary instruments to build strategic resilience. Scannapieco maintained that the same goals could be achieved through incentives and partnerships rather than broad taxes. And Kelly reminded everyone that uncertainty, not ideology, freezes a local economy.
Their tone shifted between academic, analytical, urgent and pragmatic, but their common thread was unmistakable – business can live with high costs, not with shifting ones.
“So, set the rules, keep them steady and let companies plan,” Myers said in closing.
On that, every panelist agreed.