WASHINGTON – In March 2018, a day after announcing sweeping tariffs on metals imported from both U.S. allies and adversaries, the president Donald Trump took to social media to share one of his central economic philosophies: “Trade wars are good and easy to win.”
As president, Trump was responsible for the biggest increase in U.S. tariffs since the Great Depression, hitting China, Canada, the European Union, Mexico, India and other governments with stiff tariffs. They struck back, imposing tariffs on American soybeans, whiskey, orange juice and motorcycles. U.S. agricultural exports fell, prompting Trump to send $23 billion to farmers to offset losses.
Now that he is running for president again, Trump is promising to ramp up his trade war to a much greater extent. He has proposed “universal base tariffs on most foreign products,” including higher duties on certain countries that devalue their currencies. In interviews he has suggested plans for a 10% tariff on most imports and a tariff of 60% or more on Chinese goods. He has also proposed cutting federal income taxes and instead relying on rates on income.
Sign up for The Morning newsletter from the New York Times
Trump, who once called himself “Tariff Man,” has long argued that tariffs would boost American factories, close the gap between what America imported and what it exported, and grow American jobs.
His first round of tariffs targeted imports worth more than $400 billion, including steel, solar panels, washing machines and Chinese goods such as smartwatches, chemicals, bicycle helmets and motorcycles. His rationale was that import taxes would revive American manufacturing, reduce dependence on foreign goods, and allow American companies to better compete with cheap products from China and other countries.
Economists say the tariffs have reduced imports and boosted U.S. factory output for certain industries, including steel, semiconductors and computer equipment. But that came at a very high cost, which probably wiped out the overall profit. Research shows that the tariffs resulted in higher prices for U.S. consumers and factories dependent on foreign inputs, and reduced U.S. exports for certain goods that were subject to retaliation.
Trump is now considering taxing as many as 10 times as many imports as he did during his first term, an approach that economists say could spark a trade war that would drive up already high prices and plunge the U.S. into recession.
David Autor, an economics professor at the Massachusetts Institute of Technology, said the proposals would have “a very large effect on prices almost immediately.”
“I don’t think they will do it,” Autor said. “It could easily cause a recession.”
In a recent letter, sixteen Nobel Prize-winning economists wrote that they were “deeply concerned” about the risks a second Trump administration posed to the economy, inflation and the rule of law.
“We believe that a second Trump term would have a negative impact on the US economic position in the world and a destabilizing effect on the US domestic economy,” they wrote.
Trump and his supporters have a much more positive view of tariffs, arguing that they serve as leverage for foreign governments, reduce the trade deficit with China and result in the growth of American manufacturing jobs.
“I’m a big believer in tariffs because I think tariffs give you two things: they give you economic gain, but they also give you political gain,” Trump said in a recent podcast.
Karoline Leavitt, the Trump campaign’s national press secretary, said in a statement that “the American people don’t need worthless, outrageous Nobel laureates to tell them which president has put more money in their pockets.”
“President Trump built the strongest economy in American history,” she said. “In just three years, Joe Biden’s out-of-control spending has created the worst inflation crisis in generations.”
Jamieson L. Greer, a partner in King & Spalding’s international trade team who was involved in trade negotiations with China during the Trump administration, said the view of Trump officials was that tariffs would “particularly hurt U.S. manufacturing jobs.” can help support, especially to the extent that they remedy an unfair trade practice.”
China has long had policies that disadvantage American workers, but other countries also have unfair trade and tax policies or misaligned currencies, Greer said.
“If you level that playing field, we ensure that Americans don’t have to compete unfairly,” he said.
Trump’s tariffs have domestic supporters among the industries that have benefited from them. And President Joe Biden gave them his own stamp of approval by choosing to maintain Trump’s China tariffs while adding some of his own, including on electric cars, steel and semiconductors.
But some sectors hardest hit by Trump’s trade wars are not looking forward to a sequel. Executives in industries such as retail and spirits worry that another round of tariffs could reignite tensions, raise their costs and once again shut down critical markets abroad.
Spirits exports to Europe fell 20% after the European Union imposed a retaliatory 25% tariff on American whiskey in response to the Trump administration’s tariffs on steel and aluminum. And China’s tariffs raised the prices retailers had to pay for their products, forcing them to raise prices for their customers or cut profits.
“We need trade policy, not just more tariffs,” said David French, executive vice president of government relations at the National Retail Federation. His group, which represents department stores, e-commerce sites and grocers, waged a television ad campaign against the Trump tariffs in 2018. “All they have done is strain the supply chain and cost consumers $220 billion.”
“Former President Trump views trade as a kind of zero-sum game: if you win, I lose and vice versa,” French said. “That’s really not the way trade works.”
The power of tariffs to help or hinder exports is evident in sectors that were ultimately reprieved. In 2021, whiskey tariffs were temporarily suspended as part of a deal the Biden administration struck with the EU. U.S. whiskey exports to the bloc rose from $439 million in 2021 to $705 million last year.
Chris Swonger, the CEO of the Distilled Spirits Council of the United States, said he was hopeful that if re-elected, Trump would appreciate that strong U.S. spirits exports would help achieve his goal of reducing the trade deficit. The lobby group wants the suspension of EU tariffs, which expires next March, to be extended.
“For President Trump, we obviously appreciate and respect his efforts to reduce the trade deficit,” said Swonger, who has made his case to Trump campaign officials. “Imposing tariffs on spirits would be inconsistent with reducing the trade deficit.”
Research shows that the tariffs achieved their goal of increasing domestic production in the industries they protected, but did so by imposing other costs on the U.S. economy.
A nonpartisan government study found that tariffs on foreign steel and aluminum increased U.S. production of those metals by $2.2 billion in 2021. But American factories that use steel and aluminum to make other things, like cars, cans and appliances, had to pay for them. higher costs for their materials, and that reduced those factories’ output by $3.5 billion in the same year.
Studies suggest rates also had a mixed record when it came to jobs. In a recent paper, Autor and other economists found that the cumulative effect of Trump’s trade policies and other countries’ retaliatory measures was slightly negative for American jobs, or at best a wash.
In terms of inflation, studies estimate that U.S. households faced higher prices as a result of the tariffs – from several hundred dollars to more than $1,000 per year.
But economists say consumers likely didn’t associate the higher prices they paid with the tariffs since inflation was low during Trump’s term and the economy was strong.
While the economy remains robust, prices have risen sharply since 2021 and inflation remains high. That could make the tariff-driven price increases more obvious and painful this time around.
A recent analysis from the Peterson Institute of International Economics shows that if Trump were to impose a 10% tariff on all goods and a 60% tariff on China, the average household in the middle of the income distribution would experience about $1,700 in increased spending per year. piece would cost. year.
Another analysis, by the right-wing American Action Forum, estimated that a 10% tariff could add as much as $2,350 to the annual cost per American household. Adding a 60% tariff to China would add another $1,950 to American household spending.
The burden of these tariffs would fall more heavily on poorer households, as they spend a greater share of their income on everyday products.
That could ultimately backfire for Trump, as voters’ concerns about inflation are paramount.
As he waited in line to attend Trump’s rally on Saturday in Philadelphia, Paul Rozick, an electrical warehouse manager from Bensalem, Pennsylvania, said high grocery and gasoline prices had outpaced his pay increases.
“Inflation is going up about 20%, but our salaries are going up about 2%,” Rozick said. “I have less money in the bank because I spend more money when I walk out the door.”
c.2024 The New York Times Company
