Trump’s tariffs would rock global businesses
Published: 03:10 PM,Oct 29,2024 | EDITED : 06:10 PM,Oct 29,2024
A supporter of former President Donald Trump, the Republican nominee for president, at a campaign rally in Latrobe, Pennsylvania. — The New York Times
At a rally in Latrobe, Pennsylvania, this month, former President Donald Trump paused in front of a crowd holding signs that read “Save Our Steel” to pay homage to one of his favorite concepts.
Tariff, he said, “is the most beautiful word in the dictionary. More beautiful than love, more beautiful than respect.”
Trump demonstrated a deep affinity for tariffs during his presidency, using them as a cudgel to punish both allies and rivals as he tried to force companies to make their products in the United States.
If he wins again in November, he is promising a much more aggressive approach, a full-scale upending of the trading system in which the United States would no longer be a partner in the global flow of goods, but a mercantilist nation intent on walling itself off from the world.
The former president, who has described himself as a “Tariff Man,” has talked about tariffs as the solution to an array of problems, from making the country rich to funding tax cuts and paying for child care. But most central to his vision is the ability of tariffs to reverse decades of globalization and force factories to move back to the United States.
Trump has threatened to slap steep tariffs on every country — the most punishing levies reserved for China — to raise the cost of foreign products and try to reorder global supply chains. His tariffs would hit almost all US imports, more than $3 trillion of goods.
His approach could help some companies that are making their products in the United States, since they would make the cost of entry higher for overseas competitors. But those benefits could be outweighed by the costs. Economists say the kind of broad-based tariffs Trump is envisioning would significantly raise prices for US manufacturers and businesses that must buy material and parts from abroad. Higher prices would be passed on to US consumers, with the burden falling particularly on poorer people.
Trump’s plan would also most likely incite multiple trade wars as other countries retaliate with tariffs on American goods. Those trade spats would reduce US exports, disrupt global supply chains and shake the system of alliances that the United States has worked to construct since World War II.
“It’s very simple: It’s a really bad idea,” said Mark Zandi, chief economist of Moody’s Analytics, an economics research firm.
“You’re going to push this exceptionally good economy into a ditch, and it’ll stay there until the tariffs are normalized,” he said. “If we go down the tariff war path, we’re going down a very dark path for the economy.”
Still, Trump’s pitch is resonating with voters, many of whom voted for him in 2016 because of his promises to punish China and rip up existing free trade deals like North American Free Trade Agreement. In the ensuing years, Democrats and Republicans have embraced tariffs, particularly on products from China, as a way to reverse decades of unfettered trade that they say hollowed out US factory towns.
After initially criticizing Trump’s tariffs on more than $300 billion of products from China, President Joe Biden chose to keep most of them, and added a few of his own. Vice President Kamala Harris’ campaign has said she plans to use tariffs in a “targeted” fashion, though she has criticized Trump’s plan for broad tariffs as a tax on consumers.
But the scale of what Trump is proposing is larger than any tariff increases that have been seen in nearly a century. He has floated a “universal tariff” of 10% to 20% on most foreign products and tariffs of 60% or more on China. To ban Chinese cars from coming into the United States via Mexico, he has said he would impose “whatever tariffs are required — 100%, 200%, 1,000%.”
Trump said this month that the higher the tariffs, the better they would be at forcing factories to return to the United States.
“There’s another theory is that the tariff, you make it so high, so horrible, so obnoxious, that they’ll come right away,” he said during an event in Chicago.
Trump has glowingly talked of an earlier episode in American history, when the government earned its revenue through tariffs rather than through income taxes. In a podcast Friday, he claimed the United States “was the richest” in the 1880s and 1890s, and praised President William McKinley, whose tariffs, Trump said, earned so much money that “we didn’t know what to do.”
But historians say political opinion began turning against high tariffs in the early 20th century partly because they exacerbated cronyism and burdened American consumers. The Smoot-Hawley tariff of 1930 raised import duties to protect American farmers and other businesses, setting off a trade war that exacerbated the Great Depression. Since then, US officials have typically worked toward reducing trade barriers. — The New York Times
Tariff, he said, “is the most beautiful word in the dictionary. More beautiful than love, more beautiful than respect.”
Trump demonstrated a deep affinity for tariffs during his presidency, using them as a cudgel to punish both allies and rivals as he tried to force companies to make their products in the United States.
If he wins again in November, he is promising a much more aggressive approach, a full-scale upending of the trading system in which the United States would no longer be a partner in the global flow of goods, but a mercantilist nation intent on walling itself off from the world.
The former president, who has described himself as a “Tariff Man,” has talked about tariffs as the solution to an array of problems, from making the country rich to funding tax cuts and paying for child care. But most central to his vision is the ability of tariffs to reverse decades of globalization and force factories to move back to the United States.
Trump has threatened to slap steep tariffs on every country — the most punishing levies reserved for China — to raise the cost of foreign products and try to reorder global supply chains. His tariffs would hit almost all US imports, more than $3 trillion of goods.
His approach could help some companies that are making their products in the United States, since they would make the cost of entry higher for overseas competitors. But those benefits could be outweighed by the costs. Economists say the kind of broad-based tariffs Trump is envisioning would significantly raise prices for US manufacturers and businesses that must buy material and parts from abroad. Higher prices would be passed on to US consumers, with the burden falling particularly on poorer people.
Trump’s plan would also most likely incite multiple trade wars as other countries retaliate with tariffs on American goods. Those trade spats would reduce US exports, disrupt global supply chains and shake the system of alliances that the United States has worked to construct since World War II.
“It’s very simple: It’s a really bad idea,” said Mark Zandi, chief economist of Moody’s Analytics, an economics research firm.
“You’re going to push this exceptionally good economy into a ditch, and it’ll stay there until the tariffs are normalized,” he said. “If we go down the tariff war path, we’re going down a very dark path for the economy.”
Still, Trump’s pitch is resonating with voters, many of whom voted for him in 2016 because of his promises to punish China and rip up existing free trade deals like North American Free Trade Agreement. In the ensuing years, Democrats and Republicans have embraced tariffs, particularly on products from China, as a way to reverse decades of unfettered trade that they say hollowed out US factory towns.
After initially criticizing Trump’s tariffs on more than $300 billion of products from China, President Joe Biden chose to keep most of them, and added a few of his own. Vice President Kamala Harris’ campaign has said she plans to use tariffs in a “targeted” fashion, though she has criticized Trump’s plan for broad tariffs as a tax on consumers.
But the scale of what Trump is proposing is larger than any tariff increases that have been seen in nearly a century. He has floated a “universal tariff” of 10% to 20% on most foreign products and tariffs of 60% or more on China. To ban Chinese cars from coming into the United States via Mexico, he has said he would impose “whatever tariffs are required — 100%, 200%, 1,000%.”
Trump said this month that the higher the tariffs, the better they would be at forcing factories to return to the United States.
“There’s another theory is that the tariff, you make it so high, so horrible, so obnoxious, that they’ll come right away,” he said during an event in Chicago.
Trump has glowingly talked of an earlier episode in American history, when the government earned its revenue through tariffs rather than through income taxes. In a podcast Friday, he claimed the United States “was the richest” in the 1880s and 1890s, and praised President William McKinley, whose tariffs, Trump said, earned so much money that “we didn’t know what to do.”
But historians say political opinion began turning against high tariffs in the early 20th century partly because they exacerbated cronyism and burdened American consumers. The Smoot-Hawley tariff of 1930 raised import duties to protect American farmers and other businesses, setting off a trade war that exacerbated the Great Depression. Since then, US officials have typically worked toward reducing trade barriers. — The New York Times