Republican presidential candidate Donald Trump wants to bring back U.S. manufacturing and lower costs, relying on tariffs to boost U.S. coffers and exert pressure on other countries -- but the reality is less straightforward.
Ahead of November's election, economists warn his policies could raise consumer prices and shake up global trade -- with unclear benefits to U.S. production.
The pitch is for tariffs to add billions in revenue and take aim at countries like China which have been "ripping us off," while pushing businesses to bring production back on U.S. shores.
"Other countries are going to finally, after 75 years, pay us back for all that we've done for the world," Trump said in his September debate with Democratic nominee Kamala Harris.
He told a rally in Michigan last week: "Tariffs, to me, are the most beautiful word."
The former president has vowed a 10 percent to 20 percent across-the-board tariff on imports and a 60 percent rate on Chinese goods -- more recently threatening a 200 percent levy on automobiles made in Mexico.
It is U.S. businesses -- not foreign governments, as Trump often asserts -- that pay import taxes on overseas purchases when there are tariffs on such goods, and they can pass on the higher costs, which could add to inflation.
Alongside his tariff plans, Trump wants to extend expiring tax cuts and lower corporate income tax further.
But proposed tariffs could counteract the benefits from his tax policy "while falling short of offsetting the tax revenue losses," said the Tax Foundation think tank.
U.S. inflation could rise 1.3 percentage points above baseline next year if Trump imposed a 10 percent universal tariff and other governments retaliate, said the Peterson Institute for International Economics (PIIE).
Sharp hikes on Chinese goods would also fuel inflation, the institute added.
Others, like Bernard Yaros of Oxford Economics, estimates a Trump presidency could raise inflation by 0.6 percentage points at its peak.
Previously, businesses bore the brunt as imported components got more expensive, said Kyle Handley, professor at UC San Diego.
But he noted: "If they do an across-the-board tariff of 10 percent to 20 percent, there's no way we're not going to see that on store shelves."
And it is unlikely that manufacturing can return to the United States in short order.
"We haven't made TVs in the U.S. in decades," Handley said, adding that U.S. factories are not producing at the scale needed to satisfy consumption either.
Trump claims earlier tariff hikes on China and others brought no inflation.
But Handley estimates the supply chain frictions exporters faced were equivalent to a two to four percent tariff hit -- and companies tell AFP they have had to pass on some costs.
A 2019 paper in the Journal of Economic Perspectives found that by end-2018, import tariffs were costing U.S. consumers and importers an additional $3.2 billion per month in added tax costs.
Trump's tariff plans could also slash bilateral U.S.-China trade by 70 percent, redirecting or eliminating hundreds of billions of dollars' worth of exchanges, said Oxford Economics.
U.S. trade volumes could be cut by 10 percent, becoming more centered on North American and other free trade agreement partners, the advisory firm added.
While the added tariffs would raise some $500 billion in revenue annually, rerouted trade from China could slash this figure closer to $200 billion per year eventually, Yaros said.
Other proposals like revoking a status that shields China from various U.S. levies -- "permanent normal trade relations" -- could also raise inflation by 0.4 percentage points in 2025, PIIE added.
Although Trump wants a "reciprocal trade act" where "countries that make us pay a tax to do business with them will be charged the same tax when they send their product into the United States," Yaros believes this is less likely as it requires bipartisan Congressional support.
Trump regularly promises to eliminate inflation, too -- a critical voter concern -- saying he would slash energy bills in half within a year.
Analysts expect that this refers to more deregulation in the domestic oil and gas sector.
But Yaros expressed skepticism that this would "unleash significantly greater production" given that it depends on major energy producers, who in turn have shareholders to answer to.
While Trump wants to lower food costs by allowing less foreign agricultural products into the country, economists have noted that import barriers could trigger retaliation.
This could harm U.S. farmers who export significantly.
© 2024 AFP
37 Comments
dagon
Yeah, that is all you need to read and everything else like no taxes on tips is just window dressing.
This is what Trump's billionaire backers want and what will inevitably pass into law as many of his other proposals stall.
More failed trickle down economics.
That rising tide lifts all yachts.
https://www.theguardian.com/commentisfree/2019/jun/12/why-are-we-still-pretending-trickle-down-economics-work
GBR48
This would be good for most of the RotW. Countries that export a lot of lower-priced goods to the US might be worried, but it is a big planet and there are other emerging consumer societies to switch your exports to.
Rich Americans will continue buying high-end imported stuff as they won't notice the additional costs. China will have a brief glut of products that are blocked from going to the US, which the rest of us should be able to import at a discount. Any US import tariffs would be paid by US consumers.
There is no reason to respond with tit-for-tat tariffs/barriers. That would just push up prices domestically. If Trump wants to beggar his loyal subjects and starve them of consumer goods, he can. Lower import taxes and tariffs reduce inflation. The lower they are, the better. Especially with agricultural products, as lower food prices will make your regime popular and reduce food poverty. Most G7 countries are shutting out migrant labour, gutting agricultural potential and reducing domestic harvests. Harvests that are already damaged by climate change. Supplies of food products will get patchier in the future, so being able to import them at the lowest possible cost from anywhere you can is important [hence China's Belt and Road]. Japan has run a bit short of several products recently: rice, potatoes, butter. Lower the import tariffs and open up more supply chains. Lower bills (which Ishiba wants), happier consumers and no shortages.
Isolated economies trend to the North Korean model. Keeping prices low is key to political popularity, poverty reduction and maintaining food supplies. It is idiocy to artificially increase prices (as the EU are doing with Chinese EVs - slowing their green transition). Dump import tariffs and you reduce the increasing, damaging effects of a declining global economy and cold war divisions.
marc laden
THank you JT... for enlightened me in this topic.... Lets keep Harris plan... I am happy to pay up to 100 USD for one gallon of gasoline .... And if grocery price each kg up to 200 USD.... Thank you Harris.... We need to keep this momentum.... And Trump he will suffer if the gas price goes up.. Because republicans and independents will die with out money to buy grocery and gas and necessary things... Lets defeat them by increasing the prices...
Thank you my intelligent Kamala... She needs a teleprompter to talk to us.. Lets make a mobile teleprompter .. Thank you for the onw who is answer questions for her behind the curtain.. Long live Kamala presidency ..
marc laden
dagon
90% of billionaires in USA are supporting Kamala.... why??? Are they stupid? They know Trump will not do good for them as Kamala... Kamala will act as a rubber stamp for 10 Trillion dollar company Black rock and George Soros .
We stupid voters think Kamala is for working class.. We are living in a delusion.
Peter Neil
trump isn’t the problem, or who scares me.
i’m more afraid of the tens of millions of brain dead fools who believe what he says.
did you ever think there were so many people dumber than rocks?
this is an election about intelligence - the people on the left side of the iq curve vs. the people on the right side of the iq curve.
Ah_so
As you don't have facts or evidence on your side, you jump to wild exaggeration, which in turn renders any argument you were trying to make so obscure that it's lost on readers.
Trump's plan will push up inflation, and no nonsense about $100 gasoline will change that.
Peter Neil
in an example of trumpism, donald "i don't care about you. i only want your vote" trump left coachella, but didn't pay for busses for people to get to the parking area after it was over.
no toilets, in the dark, a minimum 2-hour walk to their cars. old people, handicapped people still waiting at 10pm after 3 hours who can't get to their cars.
it's the perfect message for them about what to expect from their vote.
trump, fox news and dailymail will probably blame it on immigrants and democrats, who were having a bbq of cats, dogs and pets.
Ah_so
It isn't about IQ, although poor critical reasoning skills may play a role in Trump's popularity among the poorly educated.
MAGA is essentially a cult, and that requires brainwashing. Intelligent people end up in cults just as frequently as the less intelligent.
wallace
A 60% tariff is a 60% sales tax the consumer pays.
Ah_so
Ironically, because all of Trump's merchandise is sourced from China, such as MAGA hats and his $60 bibles.
lincolnman
Fleece as many of his blinded, uneducated, easily manipulated supporters as he can - perhaps the only "accomplishment" he can say he succeeded at in seven years...
I mean come on, hawking Chinese-made Bibles that cost $3 to make and sell for $59.99?
It's all about the "Art of the Con"...
wallace
With the proposed tariffs the price of Trump's bible will increase from $60 to $90.
dagon
False. Not counting Musk and Thiel and Andreesen there is tons of conservative dark money behind Trump.
https://www.opensecrets.org/news/2024/03/unprecedented-surge-in-dark-money-floods-2024-elections/
Most people know Kamala is not a working class Savior like Bernie Sanders but are smart enough to know Trump is much much worse.
bass4funk
No, the Dems are just angry that people like that idea, believe it or not, taxing people into oblivion will never help the Dems in the long term
The corporate billionaires back Harris overwhelmingly, the workers and small businesses back Trump.
Well, we see how how over-taxing people gets them to pack up and leave the state.
Calif has enough of them.
Peter Neil
a guy who bankrupted all 6 companies he ever started is going to bankrupt america.
he’s just a social media influencer because he looks, speaks and acts like a clown.
he still doesn’t understand how tariffs work. but, mexico is going to pay for them.
all he needs are big floppy shoes and a red ball nose.
wtfjapan
more recently threatening a 200 percent levy on automobiles made in Mexico.
which a president cant do unilaterally, as part of the new NAFTA deal which Trump signed , only an act of congress can change the rules of the deal , impose tarriffs unilaterally
wtfjapan
This entire tax loving party can fit in a clown car.
its Trump that wants to impose a blanket tarriffs on imports, yes tarriffs are a tax , the end consumer pays for it in the final total, watch and see what happens to inflation if Trump signs that.
wtfjapan
Well, we see how how over-taxing people gets them to pack up and leave the state.
no state will be immune from Trumps federal tarriffs
wtfjapan
Calif has enough of them.
Florida just entered the chat
Blacklabel
The Trump economic plan worked to perfection last time, until Chyna unleashed COVID on the world.
Biden-Harris plan failed horribly, with no excuse of a pandemic.
Prices are up 50% for most items. Which is really a normal person’ interaction with “the economy”
bass4funk
He absolutely can sign an executive order if Congress doesn’t act, but at the same time with the Senate going back to the Republicans and the Republicans may be retaining the house, that will happen, and Mexico news knows this is a non-negotiating starter with Trump.
We are already paying for heavy taxes, and it depends on which ones we’re talking about
Yes, the California loan has 27 different forms of taxes that you have to pay not to mention how much taxes come out of your paycheck, you’re not gonna see that in red state you’re gonna keep more of your money
TaiwanIsNotChina
Genius I tell you.
TaiwanIsNotChina
Well I guess when other countries raise their tariffs sky high, certain commodities will go through the floor like soybeans. Many will soon be out of business, though.
R B Quinn
The former Insurrectionist-in-Chief is clueless.
We the People of the United States of America deserve better.
bass4funk
Every country has to worry about their own self-interests.
Blacklabel
harris did absolutely nothing? Odd admission.
gotta love the left and these ever would Trump do if he’s President.
odd how they seem to have forgotten he was President for 4 years already. Despite supposedly also being traumatized by it. lol
Anonymous
marc laden:
Viva! Viva!
Blacklabel
I guess the positive thing is any Kamala economic plan will never be implemented.
maybe she was smart to not waste her time even making or communicating one outside of giving away free stuff.
she was up 5 points in several polls 2 weeks ago, now she lost most or all of the lead.
is her campaign imploding? Panic! Or was she never winning to begin with? Panic!
TaiwanIsNotChina
I thought groceries needed to be half price again. You really need to decide which one is actually important.
dagon
Trump keep on tripe as if he does it enough times he can rewrite history. His rhetoric is that he had gold paving the streets during his admin followed immediately by hellhole.
Get real. The Trump truckle down tax cuts for the rich created crippling debt just like Reagan's did.
https://www.propublica.org/article/national-debt-trump
While real wages for workers stayed stagnant as ever.
https://theconversation.com/real-pay-data-show-trumps-blue-collar-boom-is-more-of-a-bust-for-us-workers-in-3-charts-131264
Those are the facts and Trump wants trickle down x10 for his next admin.
wtfjapan
Every country has to worry about their own self-interests.
and when your own self interests effect all other countries including your allies then you know youve got a problem. Trumps tarriffs will effect many of Americas allies, EG Canada Japan Mexico EU Korea , America wont be immune to the global trade war he will start, not even mentioning China. Does Trump really believe these same countries wont put retalitory tarriffs on AMericas exports.
Blacklabel
What do those countries import from USA that matters?
and don’t they make all of it more expensive than local products to protect themselves?
as well increase (but never decrease) the price for “currency fluctuation”?
bass4funk
They will, when fuel prices come down
We did. Again, there is a reason why people are fleeing blue states and taxes are one reason
MontiePieThong
I think it's safe to assume that if he does have a plan that it will be to slash government spending by cutting aid to the poor, the sick, the vets and help Russia win the war against Ukraine whilst he and his buddies get even richer.
Blacklabel
the two most important things to actual Americans, yes.
not abortion and Ukraine.
Blacklabel
and those workers, circa right now, how they doing? Worse?
bass4funk
That is the idea, get their attention
Yup
They can try, but since they all need the U.S. for one thing or another, I doubt it.