Former President Trump has been extremely vocal recently about his plans to impose tariffs on foreign imports into the United States. These tariffs would only be put in force if Trump is reelected, but in such a tight race it’s important to take these factors into account. In his previous administration, President Trump implemented a tariff on roughly 14% of foreign imports, these imports were kept in place by the Biden administration, and were even lightly added to by President Biden and Vice President Harris. She has recently stated her disapproval of Trump’s proposed tariffs, though that doesn’t mean she is completely anti-tariff.
At his Michigan town hall last month Trump said, “Tariffs are the greatest thing ever invented,” Trump’s newly proposed tariffs would be extended to practically 100% of foreign imports, potentially even imports from countries we have free trade agreements with, such as Mexico and Canada. Agreements that Trump’s administration put into place. Trump has said that he wants to add a 10% or 20% tariff on ALL foreign goods coming across the border, and a tariff potentially as high as 60% on Chinese goods. The main motive behind President Trump’s tariffs is to encourage domestic production, buying, jobs, and lower inflation. His hope is that with the cost of foreign imports increasing, more corporations and consumers will turn to domestic products. He sees this as America’s solution for all of its current economic struggles, including the national debt. There are pros and cons to a tariff oriented solution, let's start with the pros.
Paul Wiseman of Associated Press writes, “By raising the price of imports, tariffs can protect home-grown manufacturers. They may also serve to punish foreign countries for committing unfair trade practices, like subsidizing their exporters or dumping products at unfairly low prices…Tariffs can also be used to pressure other countries on issues that may or may not be related to trade. In 2019, for example, Trump used the threat of tariffs as leverage to persuade Mexico to crack down on waves of Central American migrants crossing Mexican territory on their way to the United States.” Former President Trump has also mentioned that he can use tariffs as a way to punish countries for instigating or planning to instigate wars. He said the following at a rally in August, “We’re going to charge you 100% tariffs. And all of a sudden, the president or prime minister or dictator or whoever the hell is running the country says to me, ‘Sir, we won’t go to war.’ ” Trump believes that these tariffs will create domestic jobs and lower domestic prices, specifically food prices. He believes that U.S. farmers will have increased sales and revenues as the prices of imported foods increase. Trump said last week, “The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States so it doesn’t have to pay the tariff,”
Although there are some positive effects of tariffs, there are also quite a few negative effects that the tariffs will have. Tariffs can be particularly expensive for companies that are dependent on imports. This increases their cost of doing business, meaning they will either have to increase prices or cut their labor force, both of which hurt consumers. Trump has claimed that tariffs are paid for by the foreign companies, however that is generally not how it works out. Generally, American companies end up footing the bill at the border, and then they pass that on to their customers via price increases. This is a concern with food prices, Trump believes that tariffs will increase domestic food buying. However, tariffs may just reduce competition, driving prices higher as less options are available. So the consumer ends up paying for tariffs. A recent study has shown that a universal 20% tariff may increase the normal American family about $4,000 a year.
Another concern with the tariffs is that they spark retaliatory action from other nations, beginning a trade war of sorts. While talking about the tariffs Trump put in place during his administration, Paul Wiseman wrote, “Worse, the retaliatory taxes imposed by China and other nations on U.S. goods had “negative employment impacts,’’ especially for farmers, the study found. These retaliatory tariffs were only partly offset by billions in government aid that Trump doled out to farmers. The Trump tariffs also damaged companies that relied on targeted imports.” Retaliatory action from foreign governments is a strong possibility if Trump puts his tariffs into place. China could also retaliate in other ways than tariffs, asset managers at Lazard wrote, “China could also opt to employ nontraditional trade retaliation measures that would disproportionately impact the United States, such as currency depreciation, withholding supplies of critical minerals, reducing imports of politically sensitive US products, selling off US assets, extending tax rebates to local exporters, and cutting interest rates,”
In terms of Trump’s ability to actually put his trade plans into effect, Tobias Burns of The Hill wrote, “Congress has power over taxation and the collection of duties, has increasingly delegated authority on tariffs to the executive branch since the 1930s. One recent law gives the president the power “to proclaim limited changes to U.S. tariff rates without further congressional action,” according to a recent legal summary by the Congressional Research Service (CRS). This means that Trump, if he wins the presidency, has a good deal of leeway to turn his tariff ambitions into a reality.”
There is generally a lot of contention among economists regarding the viability of tariffs as an economic strategy. It really comes down to whether or not the effect of the pros can outweigh the effects of the cons or not. One thing is for sure, if Trump is reelected in November, his tariffs will be put into place.
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