Note to Donald Trump: Tariffs are a tax on Americans, no matter what you might say


Donald Trump’s trade policies were bad when he was president, and they would be much worse if he becomes president again. He is proposing a minimum tariff on all imports, with aides floating a rate of 10 percent. After his record of failure on specific tariffs for washing machines or steel and aluminum during his presidency, a universalized version of that failure is in nobody’s best interest — except trade lawyers in Washington, D.C.


Despite its description as universal, if actually implemented, it would not be. Every lobbyist from every company with international trading partners (which is basically all the big ones, and the small-business lobby wouldn’t be happy about it either) would march on Washington demanding exemptions. Many of them would make very convincing cases.

For example, the Big Three automakers essentially treat Michigan, Ohio, and Ontario as one economic zone, with parts and finished products moving across the U.S.–Canada border in both directions every day. Canada isn’t an enemy, and no politician wants to be blamed for lost auto-manufacturing jobs, so that exemption would likely come easy. At that point, every other lobbyist would smell blood in the water.

Of course, these exemptions would be doled out according to political favoritism as well. Protectionism has a way of turning into a protection racket, where political support is exchanged for favorable treatment by the government. A universal tariff would be a universal invitation for corruption.

Tariffs are a tax on Americans, no matter what any politician may tell you. Trump is arguing for a tax increase, undermining his greatest legislative achievement as president, the Tax Cuts and Jobs Act. This tariff proposal could be called the Tax Hikes and Unemployment Act.

Protectionists promise to save jobs, but a universal tariff would be disastrous for American workers. About half of all U.S. imports are inputs for domestic production. By raising the price of those inputs, tariffs would lead many companies to compensate by hiring fewer workers or laying off existing workers.

Worse than the tax increase itself, though, would be the turmoil a 10 percent tariff would cause in foreign affairs. It would violate many of the trade agreements currently in place, and other countries would retaliate with their own tariffs on U.S. products. That would be a further invitation for lobbyists to come to Washington asking for exemptions and special favors.

Trump portrays himself as an economic nationalist, but his tariffs would weaken America’s standing in the world. Making it harder to trade with the U.K., the EU, Mexico, Canada, Japan, South Korea, India, Australia, Israel, Brazil, and Taiwan is not in the U.S. national interest.

It is one of the great national strengths of the U.S. that basically every other country in the world wants to do business with Americans. Most countries have to beg for international commerce, creating all kinds of incentive programs and diplomatic campaigns to attract foreigners. But the U.S. is the largest consumer market in the world, and foreigners are very keen to sell to us.

Trump had his chance on trade, unilaterally imposing tariffs on specific products for four years. We know how those worked out. His tariffs on steel and aluminum added about 26,000 jobs in the steel and aluminum industries, but cost about 500,000 jobs everywhere else. Far more Americans are employed in industries that use those metals than in the industries that make them. What’s good for the politically well-connected steel industry is not necessarily good for the country.

His tariffs on washing machines, created partly at the request of Whirlpool, raised $82 million in revenue while costing consumers $1.5 billion. Bad deal. Domestic washing-machine producers added 1,800 estimated jobs, which means the tariffs “created” those jobs at a cost of about $815,000 each. Really bad deal.

In total, despite his four years of trade wars, the trade deficit, which Trump claims is a huge problem, increased on his watch. In perhaps the most damning indictment of Trump’s trade policies, Joe Biden has mostly left them in place, and the trade deficit has stayed high. These policies aren’t even achieving the misbegotten goal of lowering a national-accounting statistic, let alone boosting real economic output or employment.

Yet Trump is, in essence, shouting, “True tariffs have never been tried!” They have, they didn’t work, and they should be reduced, not increased.

Dan Butcher

Dan Butcher (aka HP Pundit) is not a Democrat or Republican. He is a free thinking independent bringing you news and commentary with a dose of much needed common sense.

Post a Comment

Previous Post Next Post