Written by Jack Elbaum
What’s happening: Former President Donald Trump recently proposed a tariff (or tax) of 10 percent on all imports to the U.S. If implemented, it would represent a continuation of the nationalist trade policies he pursued while president.
The reaction: The White House, think tanks, news outlets, and academics swiftly attacked the proposal. President Joe Biden’s administration called it a plan that would cause “higher prices and higher inflation,” while the Wall Street Journalargued it would lead to higher prices and fewer jobs. This echoes the reaction to Trump’s trade war during his first term.
- Trump responds: In a letter to the editor, Trump attacked the Journal’s editors as “die-hard globalists.” He touted reductions in the trade deficit, particularly with China, during his presidency, though historically, trade deficits are not a reliable measure of the strength of an economy.
What’s the goal? By making goods the U.S. imports more expensive through tariffs, Trump hopes to 1) incentivize the building of industry at home and 2) reduce the U.S.’s trade deficit (meaning how much more we spend on imports from other countries than they spend on our exports).
- The results? A Tax Foundation study found Trump’s tariffs cost America $80 billion, and another from the Federal Reserve Board of Governors found that it cost the U.S. 75,000 manufacturing jobs.
- At the same time: As Biden kept Trump’s tariffs, some data suggest there has been a factory boom in America as CEOs moved production out of China. There also isn’t definitive proof that the tariffs increased prices on consumers, though most Americans are willing to pay more for higher-quality, American-made goods anyway, polling shows.
Zoom out: Free trade created incentives for businesses and industry to leave the U.S., which happened in many places over the past three decades, creating hollowed-out towns. While free trade can bring cheaper goods, it also has costs, such as the potential offshoring of manufacturing and jobs. Trump appealed to so many in 2016 by tapping into this reality.