Trump's Tariffs

 

“To me, the most beautiful word in the dictionary is tariff, and it’s my favorite,” Republican presidential candidate Donald Trump told a gathering in Chicago on Tuesday. “I’m a believer in tariffs.”

Import duties are perhaps the most solid plank of Trump’s election platform. They were a feature of his presidency, when he slapped tariffs on roughly $360 billion in Chinese imports, as well as on steel and aluminum imports, washing machines and solar panels.

Closely allied Western countries did not escape the tariff dragnet. Trump has vowed to vastly expand such protectionist measures should he return to office, raising tariffs on Chinese goods to some 50 or 60 percent and even exacting a 10 to 20 percent levy on all imports from elsewhere.

In Trump’s view, such an approach is necessary to rebalance a global economy somehow skewed against the United States. His tariffs, the argument goes, would incentivize businesses, including U.S. companies, to locate their manufacturing operations within the United States.

Trump often claims, “that tariffs raise costs only for foreign nations, though economists say the duties, usually paid by importers to the government, are typically passed on to consumers in the form of higher prices,” my colleagues Jeff Stein and David Lynch explained.

It would bring the nation back to what Trump somewhat erroneously casts as its halcyon days of the late 19th century, when tariffs were high (and not particularly effective). More immediately, it would mark a profound shock to an interdependent global economy, likely sparking retaliatory measures from other countries and plunging the United States into a new, uncertain era of mercantilism.

Not surprisingly, Trump’s opponents are skeptical. “Calls for walling America off with high tariffs on friends and competitors alike, or by treating even our closest allies as transactional partners are deeply misguided,” Treasury Secretary Janet L. Yellen said during a speech Thursday. “Sweeping, untargeted tariffs would raise prices for American families and make our businesses less competitive.” She didn’t mention Trump by name, but pushed against policies that would speed “isolationism and retrenchment.”

Her arguments are buttressed by many analysts, including 16 Nobel-prize winning economists, who wrote a joint letter in June warning against Trump’s mooted proposals. “Many Americans are concerned about inflation, which has come down remarkably fast,” they note. “There is rightly a worry that Donald Trump will reignite this inflation, with his fiscally irresponsible budgets.”

One of those signatory economists, Joseph Stiglitz, wrote more recently about how increased tariffs on Chinese goods would have a significant downstream impact on poorer Americans. A tariff of 20 percent on all imports could amount to a more than $4 trillion tax hike over the next decade, according to research cited by my colleagues.

“As any serious economist could have told him, this would increase prices — not just for the goods imported directly from China, but also for the innumerable other goods containing Chinese inputs,” Stiglitz wrote in September. “Thus, lower- and middle-income Americans would bear the brunt of the cost. As inflation rises and the U.S. Federal Reserve is forced to raise interest rates, the economy would be hit by the triple whammy of slowing growth, rising inflation and higher unemployment.”

Yet rather than a radical outlier, Trump seems to offer just the bluntest expression of a broader zeitgeist. Polls show that a slim majority of U.S. voters favor imposing steeper tariffs on foreign goods. The Biden administration has preserved much of Trump’s tariffs, and embraced industrial policy with a seriousness the Trump administration never mustered. White House national security adviser Jake Sullivan famously called for a “new consensus” on the global economy in a speech last year, one that calibrated trade policy around the rough edges of burgeoning geopolitical competition.

In his sweeping report about boosting European competitiveness, former Italian prime minister Mario Draghi suggested tariffs on certain clean-tech imports could help combat China’s outsize advantage in the sector.

The challenge posed by China’s rise and industrial overcapacity and the divides brought about by Russia’s war in Ukraine — which triggered sweeping Western sanctions on the Kremlin — have led to “increasing signs of fragmentation,” declared Gita Gopinath, a top official and economist at the International Monetary Fund, earlier this year. “Trade and investment flows are being redirected along geopolitical lines.”

Still, Trump’s indiscriminate measures would have vast and immediate consequences. “The world economies are now so interwoven with each other — to rip and pull that apart would be incredibly disruptive to the U.S.,” Douglas A. Irwin, an economist at Dartmouth College, told my colleagues. “It would really ripple through the economy in ways that are very hard to predict.”

“Day one, if there’s a 10 percent tariff put in place, day two, there’s going to be retaliatory tariffs from all of our trading partners,” said John Veroneau, a former deputy U.S. trade representative under President George W. Bush, to The Washington Post.

There’s always a chance that Trump is posturing, foisting populist red meat in front his base while preparing instead for a presidency where he’ll boost the interests of billionaires and major corporations, as he did in his stint in power. But his repeated insistence and focus on tariffs suggests a genuine ideological conviction.

In a statement to The Post, Trump adviser Brian Hughes scoffed at the critics: “These Wall Street elites would be wise to review the record and acknowledge the shortcomings of their past work if they’d like their new forecasts to be seen as credible.”

The mood of the moment has led to a strange turning of the table, with Beijing frequently touting itself as the champion of forms of globalization that few Western statesmen are now willing to defend. A joint communiqué from a meeting in Pakistan of the Chinese-led Shanghai Cooperation Organization, which has ten member states, blasted the West’s use of tariffs against Chinese goods and said it would “continue joint efforts to counter protectionist trade measures.”

-Ishaan Tharoor, Washington Post