Impact of Trump’s Trade Tariffs, Tariffs and Consumer Prices, Impact on Jobs and Trade Deficit
Donald Trump has pledged to drastically increase tariffs on foreign goods entering the US if he is elected president again. The Trump trade tariffs impact is likely to be significant, with promised tariffs of up to 20% on goods from other countries and 60% on all imports from China. He has even talked about a 200% tax on some imported cars.
Tariffs are a central part of Trump’s economic vision. He sees them as a way to grow the US economy, protect jobs, and raise tax revenue. On the campaign trail, he has claimed that these taxes are “not going to be a cost to you, it’s a cost to another country.” However, most economists regard this claim as misleading.
How Do Tariffs Work?
A tariff is a domestic tax on goods as they enter the country. The amount is proportional to the value of the import. For example, a car imported to the US with a value of $50,000, subject to a 10% tariff, would face a $5,000 charge. This charge is paid by the domestic company that imports the goods, not the foreign company exporting them.
Tariffs brought in around $80 billion in 2023, which accounted for approximately 2% of total US tax revenues. The economic burden of tariffs can fall on US consumers, importing firms, or foreign exporters, depending on how the cost is distributed.
Impact of Trump’s Trade Tariffs on Consumer Prices
Economic studies of Trump’s previous tariffs, imposed between 2017 and 2020, suggest that most of the burden was ultimately borne by US consumers. A survey by the University of Chicago in September 2024 found that most respected economists agreed tariffs result in higher consumer prices in the country enacting them.
For instance, Trump imposed a 50% tariff on washing machine imports in 2018. Researchers estimated that washing machine prices jumped by around 12% as a direct consequence. This increase cost US consumers about $1.5 billion extra per year. Similar outcomes are expected if Trump implements new, higher tariffs.
The non-partisan Peterson Institute for International Economics estimated that Trump’s proposed tariffs would lower Americans’ incomes. A typical middle-income household would lose around $1,700 each year. The Centre for American Progress estimated losses of $2,500 to $3,900 for middle-income families.
Impact on Jobs and Trade Deficit
Trump argues that tariffs protect and create US jobs. The political context includes concerns about losing US manufacturing jobs to countries with lower labor costs, especially after agreements like NAFTA and China’s entry into the World Trade Organization.
However, economists argue that automation also played a significant role in reducing manufacturing jobs. Studies of Trump’s first-term tariffs found no substantial positive effects on overall employment in protected sectors. Despite imposing a 25% tariff on imported steel in 2018, employment in the US steel sector remained lower than in previous years.
Trump has also criticized America’s trade deficit, claiming that “trade deficits hurt the economy very badly.” Despite his tariffs, the trade deficit grew from $480 billion in 2016 to $653 billion in 2020. Economists attribute part of this to increased demand for the US dollar, which made US exports less competitive globally.
Challenges and Support for Tariffs
While many economists oppose Trump’s tariff plans, some support them. Jeff Ferry of the Coalition for a Prosperous America argues that tariffs could boost US industry. Oren Cass, from the conservative think tank American Compass, believes tariffs can incentivize firms to keep manufacturing in America, which could benefit national defense and supply chain security.
Interestingly, the Biden/Harris administration has kept in place many of Trump’s tariffs and even imposed new ones on imports like Chinese electric vehicles. These tariffs are justified on national security grounds, US industrial policy, and concerns over unfair subsidies from Beijing.
External Link: BBC News
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