Tariffs are critical to President Trump’s fiscal policies and strategy for manufacturing.

Depending on which tax cuts and spending initiatives lapse or are extended, the One Big Beautiful Bill Act will add between $340 billion and $470 billion annually to federal deficits. through 2034.

Relying on authority from the International Emergency Economic Powers Act and the Trade Act, President Trump has increased tariffs on imports from 2.3% to 17%.

These taxes could bring in enough revenue to mostly bridge the funding gap created by the OBBBA.

Many of the across-the-board tariffs levied on the EU, India and other nations rely on the president’s authority to declare the trade deficit a national security emergency under the International Economic Emergency Powers Act, and those appear unlikely to survive Supreme Court review.

New tariff threats against Europe to win Greenland make it more imperative and likely those will be struck down.

Ending those would reduce the average import-weight tariff to 9%. This would effectively give Americans another $150 billion tax cut and add a similar amount to the federal deficit.

Even before the OBBBA, the Congressional Budget Office estimated the federal deficit would again approach 6% of GDP by the end of the decade.

The OBBBA makes that figure 7%, assuming we hit no bumps like a prolonged recession, another pandemic or major military engagement.

The Treasury relies on foreign investors to finance a significant portion of the deficit and faces increasing competition for funds from rising budget gaps in Europe, Japan and China.

If the Supreme Court strikes down the IEEP tariffs, Plan B should include new tax or tariff measures or any reasonable hope for lowering long-term interest rates, such as those to help finance new factories, data centers and homes, will be dashed.

The president has other authority under the Trade Act, but imposing permanent tariffs generally requires lengthy investigations.

China is an exception.

Authority for Trump’s first term tariffs on China was established through a Section 301 investigation. That authority was further invoked by President Biden to tariff Chinese electric vehicles and more recently by Mr. Trump.

Regarding other nations, this may be a good time to reassess the tariffs.

The Trump tariffs are redirecting U.S. imports to other countries but for critical items where China holds commanding leadership—like rare earth minerals, starter ingredients for drugs and links in global semiconductor supply chains.

The latter are really industrial policy rather than trade policy challenges, and President Trump is seeking to boost domestic production and diversify to friendlier foreign sources.

However, the tariffs are not dramatically reducing the general reliance of the U.S. economy on imports, because the tariffs are poorly structured and the trade deficit is the mirror image of foreign purchases of U.S. public and private debt and foreign investments in U.S. businesses.

Placing higher tariffs on imported steel than on upstream products like automobiles runs counter to the application of tariffs to create price advantages for domestic manufacturing.

Though the administration can point to some new projects, for example in automobiles, pharmaceuticals and semiconductors, the renaissance in U.S. manufacturing the Trump tariffs promised isn’t apparent.

Construction spending in manufacturing—a good proxy for expansion of existing and building new factories—increased significantly in response to Biden’s industrial policies but has declined since Trump was reelected.

A similar pattern is apparent in falling manufacturing employment—advances in robotics and artificial intelligence appear to be overwhelming the initial positive impacts of the Biden industrial policies and any benefits from Trump’s tariffs.

China has diversified away from U.S. markets, but it’s using exports to sustain economic growth in the face of sick domestic economic conditions,

Increasingly, China is seen in Europe and emerging economies as an economic predator. It continues to protect jobs in the most basic labor-intensive manufacturing, even as it subsidizes high-tech exports.

A recent Goldman Sach’s study documents that the growth China accomplishes through exports is reducing growth nearly everywhere else.

German industry wants a divorce from its once profitable partnership with China. Mexico has imposed massive new tariffs on Asian nations that are ostensively aimed at China.

Foreign governments are seeking trade agreements to compensate for the loss of market access here—for example, the UK EU and others are cultivating free trade deals with India.

Those could potentially lock out U.S. exports but also represent opportunities.

As President Biden articulated, China is the pacing challenge.

We could profit better by joining in these new trade agreements to assure market access for our high-tech products and make common cause to isolate China’s predatory behavior.

New trade pacts that grant access to the U.S. markets, conditioned on strong measures mirroring ours to curtail trade with China, should be the keystone of Plan B.

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.