by Jake Colvin, President, National Foreign Trade Council (NFTC)
While former President Trump claimed at the New York Economic Club that new tariffs would “combat inflation,” the reality is that they are blunt instruments that harm working families and imperil America’s national and economic security. Here are a couple of reasons why the Harris-Walz and Trump-Vance campaigns ought to think carefully about their approach to trade barriers:
- Tariffs raise prices for consumers and working families. The combined effect of existing tariffs on steel, aluminum and Chinese goods cost a family of four an additional $764 per year according to Laura Baughman and Trade Partnership.
- Tariffs from 2018-2019 raised prices for businesses and slightly shrank U.S. manufacturing. According to the U.S. International Trade Commission, higher steel and aluminum costs caused a $3.4 billion annual loss of downstream production from 2018 to 2021, while beverage industry expenses increased $2.2 billion over almost six years, and higher prices for automobile inputs led to an average hike of $700 per vehicle. (Edward Gresser of the Progressive Policy Institutehas more on the impact of tariffs on raising prices and shrinking downstream manufacturing.)
- Tariffs didn’t “combat inflation” – the pandemic did. Because of the pandemic, “inflation fell sharply in 2020,” according to Jane Ihrig, Kevin Kliesen and Scott Wolla, moving from “a 12-month change from 2.5% in January 2020, to 0.2% in May 2020, to 1.3% at the end of the year.” Tariffs were still inflationary — but were masked by “the most abrupt economic collapsein recorded history.”
- Foreign nations will not pay us hundreds of billions of dollars like the former president claimed. Penn Wharton suggests that President Trump’s tariff proposals could “lead to revenue losses due to potential retaliatory actions from other governments and other economic dynamics.” (Gentle reminder: Americans pay those tariffs, not foreign governments. See below for a visual explanation from Scott Lincicome and the Cato Institute.)
- Higher tariffs would result in a net loss of 675,000 American jobs according to Moody’s Corporation. Mark Zandi, Moody’s Chief Economist, told CNN that, “if Trump increases tariffs as he has proposed, the economy would likely suffer a recession soon thereafter.” Those tariffs would also leave American businesses, farmers and ranchers open to retaliation by other countries.
- For working families, Brendan Duke and Ryan Mulholland of the Center for American Progress estimate that his tariff proposals could translate into additional costs of between $2,500-$3,900 each year, while Mary E. Lovely of the Peterson Institute for International Economics puts those annual costs at $1,700 or more.
- “Strategic tariffs” are still tariffs. While some have called for targeted tariffs on certain sectors, Erica York of the Tax Foundation reminds that So Called Strategic Tariffs are Still Tariffs and “it’s worth examining the goal of higher tariffs on these strategic goods, which include EVs, solar panels, and their component parts.” She asks, “Will increasing the costs for key inputs help U.S. manufacturers get off the ground?”
Far from being “smart,” tariffs would exacerbate inflation, kill jobs and harm U.S. economic growth.
Source: Cato
