In March 2018, a day after announcing sweeping tariffs on imported metals from both U.S. allies and adversaries, President Donald J. Trump took to social media to share one of his core economic philosophies: “Trade wars are good and easy to win.”
As president, Trump presided over the largest increase in U.S. tariffs since the Great Depression, hitting China, Canada, the European Union, Mexico, India and other governments with heavy levies. They responded by imposing tariffs on American soybeans, whiskey, orange juice, and motorcycles. US agricultural exports plummetedwhich led Trump to send $23 billion to farmers to help offset losses.
Now, as he runs for president again, Trump promises to escalate his trade war to a much greater degree. He has proposed “universal basic tariffs on most foreign goods,” including higher taxes for certain countries that devalue his currency. In interviews, he has laid out plans to a 10 percent tariff on most imports and a tariff of 60 percent or more on Chinese products. He has also proposed cutting the federal income tax and instead relying on tariffs for revenue.
Mr. Trump, who once was proclaimed The “tariff man” has long argued that tariffs would boost American factories, close the gap between what the United States imports and what it exports, and increase American jobs.
His first round of taxes affected more than $400 billion worth of imports, including steel, solar panels, washing machines and Chinese products such as smart watches, chemicals, bicycle helmets and motors. His reasoning was that import taxes would revive American manufacturing, reduce dependence on foreign products, and allow American companies to better compete with cheap products from China and other countries.
Economists say the tariffs reduced imports and encouraged American factory production for certain industries, including steel, semiconductors and computer equipment. But that came at a very high cost, which most likely offset any overall gains. Studies show that tariffs resulted in higher prices for American consumers and factories that depend on foreign inputs, and Reduction in US exports. for certain goods that were subject to retaliation.
Trump now plans to tax imports perhaps 10 times more than he did during his first term, a strategy economists say could trigger a trade war that pushes up already high prices and plunges the United States 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,” Mr. Author said. “It could easily cause 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 posed to the economy, inflation, and the rule of law.
“We believe that a second Trump term would have a negative impact on the United States’ economic standing in the world and a destabilizing effect on the country’s domestic economy,” they wrote.
Trump and his supporters have a much more positive view of tariffs, arguing that they serve as leverage with foreign governments, reduce the trade deficit with China and result in growth in US manufacturing jobs.
“I happen to be a big believer in tariffs because I think tariffs give you two things: They give you economic gains, but they also give you political gains,” Trump said in a recent podcast.
Karoline Leavitt, national press secretary for the Trump campaign, said in a statement that “the American people do not need useless, out-of-touch Nobel Prize winners telling them which president put the most money in their pockets.”
“President Trump built the strongest economy in American history,” he said. “In just three years, Joe Biden’s uncontrolled spending 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 among Trump officials was that tariffs “can help support manufacturing jobs.” in the United States in particular, especially to the extent that they are remedying an unfair trade practice.”
China has long implemented policies that hurt American workers, but other countries also have unfair trade and tax policies or misaligned currencies, Greer said.
“If the playing field is leveled, Americans will not have to compete unfairly,” he said.
Trump’s tariffs have national supporters among the industries that have benefited from them. And President Biden gave them his own seal of approval by choosing to keep Trump’s tariffs against China while adding some of his own, including taxes on electric cars, steel and semiconductors.
But some of the industries most affected by Trump’s trade wars are not expecting a fallout. Executives in sectors such as retail and spirits worry that another round of tariffs could reignite tensions, raise their costs and once again close critical markets abroad.
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 China’s tariffs raised the prices retailers had to pay for their products, forcing them to raise prices for their customers or cut 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 grocery stores, ran a television ad campaign opposing Trump’s tariffs in 2018. “All they have done is add friction to the supply chain and cost consumers 220 billion dollars.”
“Former President Trump views trade as a kind of zero-sum game: If you win, I lose and vice versa,” French said. “That’s actually not the way trade works.”
The power of tariffs to help or hinder exports is clear in industries that finally got a reprieve. In 2021, whiskey tariffs were temporarily suspended as part of a deal the Biden administration made with the European Union. American whiskey exports to the bloc rose from $439 million in 2021 to $705 million last year.
Chris Swonger, executive director 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 EU’s tariff suspension, which expires next March, to be extended.
“In the case of President Trump, we obviously appreciate and respect his efforts to reduce the trade deficit,” said Swonger, who made his arguments to Trump campaign officials. “Imposing tariffs on distilled spirits would be contrary to reducing the trade deficit.”
Research suggests that the tariffs achieved their goal of increasing domestic production in the industries they protected, but they 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 U.S. factories that use steel and aluminum to make other things, like cars, cans and appliances, had to pay higher costs for their materials. , and that reduced the production of those factories by $3.5 billion in the same year.
Studies suggest that tariffs also had a mixed record when it came to employment. In a recent paper, Autor and other economists found that the cumulative effect of Trump’s trade policies and retaliation from other countries was slightly negative for American jobs or, at best, a wash.
In terms of inflation, studies have estimated that American households faced higher prices as a result of the tariffs: from several hundred dollars to more than $1,000 a year.
But economists say consumers probably didn’t associate the higher prices they paid with the tariffs, given that inflation was low during Trump’s term and the economy was strong.
While the economy remains strong, prices have skyrocketed since 2021 and inflation remains elevated. That could make tariff-induced price increases more obvious and more painful this time.
A recent analysis by the Peterson Institute for International Economics found that if Trump imposed a 10 percent tariff on all goods and a 60 percent tariff on China, it would cost a typical household in the middle of the income distribution about $1,700. increasing expenses each year. .
Another analysis, by the right-leaning American Action Forum, estimated that a 10 percent tariff could impose additional annual costs of up to $2,350 per American household. Adding a 60 percent tariff on China would add another $1,950 to American households’ costs.
The burden of those tariffs would fall more on poorer households, because they spend a greater proportion of their income on everyday products.
That could ultimately backfire for Trump, given that voters’ concerns about inflation are top of mind.
Waiting in line for Trump’s rally in Philadelphia on Saturday, Paul Rozick, a manager at an electrical warehouse in Bensalem, Pennsylvania, said high grocery and gas prices had outweighed his pay increases.
“Inflation is rising 20 percent, but our wages are rising 2 percent,” Rozick said. “I have less money in the bank because I spend more money when I leave the house.”