In March 2018, a day after announcing sweeping tariffs on metal imports from America’s allies and adversaries, President Donald J. Trump used social media to share one of his core economic philosophies: “Trade wars are good and easy to win.”
As president, Mr. Trump initiated the largest increase in U.S. tariffs since the Great Depression, hitting China, Canada, the European Union, Mexico, India and other governments with high tariffs. They hit back and imposed tariffs on American soybeans, whiskey, orange juice and motorcycles. U.S. agricultural exports collapsed, prompting Trump to send $23 billion to farmers to make up for the losses.
Now that he is running for president again, Mr. Trump is promising to escalate his trade war even further. He has proposed “universal basic tariffs on most foreign products,” including higher levies on certain countries that devalue their currencies. In interviews, he has expressed plans for a 10 percent tariff on most imports and a tariff of 60 percent or more on Chinese goods. He has also proposed cutting the federal income tax and relying on revenue tariffs instead.
Mr. Trump, who once described himself as a “tariff man,” has long argued that tariffs would boost American factories, close the gap between what America imports and what it exports and create American jobs.
Its first round of levies affected more than $400 billion in imports, including steel, solar panels, washing machines and Chinese goods such as smartwatches, chemicals, bicycle helmets and engines. His rationale was that import tariffs would revive American manufacturing, reduce dependence on foreign goods and allow U.S. companies to better compete with cheap products from China and other countries.
Economists say the tariffs actually reduced imports and boosted U.S. factory production for certain industries, including steel, semiconductors and computer equipment. However, this came at a very high cost, which most likely wiped out the overall profits. Studies show that the tariffs led to higher prices for American consumers and factories that rely on foreign inputs and led to a decline in U.S. exports of certain goods that were subject to retaliation.
Mr. Trump now envisions potentially taxing 10 times as many imports as he did in his first term, an approach that economists say could trigger a trade war that drives up already high prices and plunges the U.S. into recession.
David Autor, an economics professor at the Massachusetts Institute of Technology, said the proposals would have “a very big impact on prices almost immediately.”
“I don’t think they will,” Mr. Autor said. “It could easily trigger a recession.”
In a recent letter, 16 Nobel Prize-winning economists wrote that they were “deeply concerned” about the risks that a second Trump administration poses to the economy, inflation and the rule of law.
“We believe that a second Trump term would have a negative impact on the U.S. economic standing in the world and a destabilizing effect on the U.S. domestic economy,” they wrote.
Mr. Trump and his supporters view the tariffs far more positively, arguing that they serve as leverage against foreign governments, reduce the trade deficit with China and lead to job growth in U.S. manufacturing.
“I’m a big advocate of tariffs because I think tariffs give you two things: They give you an economic gain, but they also give you a political gain,” Trump said in a recent podcast.
Karoline Leavitt, the Trump campaign’s national press secretary, said in a statement: “The American people don’t need worthless, out-of-touch Nobel laureates telling them which president put more money in their pockets.”
“President Trump has 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 is that tariffs “can particularly help protect manufacturing jobs.” to support commerce in the United States, particularly the extent to which they eliminate 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, Mr. Greer said.
“When you level the playing field, it ensures that Americans don’t have to compete unfairly with each other,” he said.
Mr. Trump’s tariffs have domestic supporters among the industries that have benefited from them. And President Biden gave them his own stamp of approval by deciding to keep Mr. Trump’s China tariffs in place while adding some of his own, including on electric cars, steel and semiconductors.
But some of the industries hit hardest by Mr. Trump’s trade wars aren’t looking forward to a continuation. Executives in sectors such as retail and liquor fear that another round of tariffs could reignite tensions, drive up costs and close key overseas markets again.
Spirits exports to Europe fell 20 percent after the European Union imposed a 25 percent retaliatory tariff on American whiskey in response to the Trump administration’s tariffs on steel and aluminum. And the China tariffs increased the prices retailers had to pay for their products, forcing them to either raise prices for their customers or cut into their 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, ran a television advertising campaign against the Trump tariffs in 2018. “All they did was create additional friction in the supply chain and cost consumers $220 billion.”
“Former President Trump viewed trade as a sort of zero-sum game — if you win, I lose and vice versa,” French said. “That’s really not how trading works.”
The power of tariffs to help or hinder exports is clearly evident in industries that ultimately received a reprieve. In 2021, whiskey tariffs were temporarily suspended as part of an agreement between the Biden administration and the European Union. American whiskey exports to the bloc rose from $439 million in 2021 to $705 million last year.
Chris Swonger, chief executive of the Distilled Spirits Council of the United States, said he was confident that if re-elected, Mr. Trump would appreciate that strong exports of American spirits would help achieve his goal of reducing the trade deficit. The lobby group wants the EU tariff suspension, which expires next March, to be extended.
“For President Trump, we obviously appreciate and respect his efforts to reduce the trade deficit,” said Mr. Swonger, who has made his case to Trump campaign officials. “Imposing tariffs on distilled spirits would be counterproductive to reducing the trade deficit.”
Research suggests that while the tariffs achieved their goal of increasing domestic production in the industries they protected, they imposed other costs on the U.S. economy.
A bipartisan government study found that tariffs on foreign steel and aluminum increased U.S. production of those metals by $2.2 billion in 2021. However, American factories that use steel and aluminum to make other things like cars, tin cans, and household appliances found themselves paying more as the cost of their materials fell, reducing those factories’ output by $3.5 billion that same year.
Studies suggest that tariffs have also had a mixed effect on jobs. In a recent article, Mr. Autor and other economists found that the cumulative effect of Mr. Trump’s trade policies and other countries’ retaliatory measures was slightly negative for American jobs or, at best, negative.
When it comes to inflation, studies have estimated that American households faced higher prices because of the tariffs – from several hundred dollars to more than $1,000 per year.
But economists say consumers likely did not associate the higher prices they paid with the tariffs because inflation was low throughout Mr. Trump’s term and the economy was strong.
While the economy remains robust, prices have soared since 2021 and inflation remains high. This could make tariff-related price increases more obvious and painful this time.
A recent analysis by the Peterson Institute of International Economics found that if Mr. Trump actually imposed a 10 percent tariff on all goods and a 60 percent tariff, it would cost a typical household in the middle of the income distribution about $1,700 more on China would raise expenses every year.
Another analysis by the right-wing American Action Forum estimated that a 10 percent tariff could add up to $2,350 in additional annual costs per American household. Imposing a 60 percent tariff on China would add another $1,950 to U.S. budget costs.
The burden of these tariffs would hit poorer households harder because they spend a larger share of their income on everyday products.
That could ultimately backfire for Mr. Trump as voters’ concerns about inflation take center stage.
While waiting in line to attend Trump’s rally in Philadelphia on Saturday, Paul Rozick, an electrical warehouse manager from Bensalem, Pennsylvania, said high food and gasoline prices had outpaced his raises.
“Inflation is going up about 20 percent, but our paychecks are going up about 2 percent,” Mr. Rozick said. “I have less money in the bank because I spend more money when I walk out the door.”
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2024-06-27 09:03:40
www.nytimes.com
