Former President Donald Trump’s resurgence onto the political stage brings with it a reinvigorated focus on his trade policies, signaling a tripling-down on the trade war that marked his first term in office. With proposals to impose a 60% tariff on all Chinese goods and a minimum 10% tariff on the entirety of the $3 trillion worth of US imports, Trump’s stance reflects a continuation of his aggressive trade tactics.
While Trump has framed these tariffs as protective measures for American workers, recent research suggests they may have the opposite effect. According to a paper published by the Peterson Institute for International Economics, Trump’s proposed tariffs could inflict significant harm on the US economy, costing consumers a staggering $500 billion annually, equivalent to 1.8% of the gross domestic product (GDP). This figure dwarfs the impact of the US-China trade war from 2018-2019, with potential repercussions nearly five times as severe.
The paper highlights that the typical middle-income household would bear the brunt of these tariffs, facing an annual cost of at least $1,700. Authors Kimberly Clausing and Mary Lovely emphasize that this estimate represents only the minimum impact, excluding additional damage from foreign retaliation, slower economic growth, and lost competitiveness. The true impact, they caution, could be twice as high.
“This is just the beginning,” says Clausing, chair in tax law and policy at the UCLA School of Law, underscoring the potential for widespread repercussions as other nations respond to US tariffs.
President Joe Biden, while critical of Trump’s tariffs during his election campaign, has largely retained them, though in a more targeted manner. Biden’s recent imposition of tariffs on $18 billion worth of Chinese goods, including steel, aluminum, computer chips, electric vehicles, and solar cells, demonstrates a continuation of protectionist measures, albeit with a more nuanced approach.
Treasury Secretary Janet Yellen’s call for European cooperation in combating the influx of cheap Chinese goods underscores the global implications of trade tensions. However, concerns linger over the economic impact of retaliatory measures from other nations.
Despite the bipartisan support for tariffs as a means of confronting China, economists warn of their detrimental effects. Moody’s estimates that even with mitigating tax cuts, Trump’s proposed tariffs could cost the US economy 675,000 jobs and exacerbate inflation. Moreover, there are doubts about the revenue generated by these tariffs, with the Peterson Institute research indicating a shortfall in funding to sustain Trump’s tax cuts.
The broader geopolitical implications of escalating trade tensions are also cause for concern. The Peterson Institute authors warn that trade disputes could hinder international collaboration on critical issues such as climate change, public health, security, and nuclear proliferation, posing significant national security risks.
As the debate surrounding tariffs intensifies, one thing remains clear: tariffs are expected to remain a prominent feature of US trade policy, irrespective of the election outcome. With bipartisan support for protectionist measures against China, the future of global trade relations hangs in the balance, amid economic uncertainties and geopolitical tensions.
