Tariffs are costs imposed on goods imported from other countries, but how effective are they and at what point do they start to hurt the economy?
The question is now at the center of the conflicting views of America’s two presidential candidates. While Vice President Kamala Harris has proposed tax breaks for middle-class Americans and higher taxes on the wealthy to boost growth and reduce the deficit, former President Donald Trump is proposing something newer: using massive tariffs to protect both U.S. expands industries and increases incomes.
During Tuesday night’s presidential debate, Trump reiterated his commitment to his plan to impose a 10% tariff on all imports and a 60% tariff on imports from China.
“Other countries will eventually pay us back for what we’ve done to the world in 75 years, and the tariffs will be significant,” Trump said, adding the GOP nominee’s proposal. A 10% tariff would raise “hundreds of billions of dollars”.
Harris, the Democratic nominee, responded that the tariffs were effectively a “sales tax” on American households.
In fact, the Biden administration recently imposed its own set of tariffs, while also extending tariffs first imposed under the Trump administration. Harris did not make it clear whether he would extend them, but He said on his campaign website he will continue to “support American leadership in semiconductors, clean energy, AI and other cutting-edge industries of the future,” addressing “unfair trade practices by China or any competitor that undermine American workers.”
While the tariff fight may be difficult, it’s key to understanding the candidates’ economic views — not to mention how third parties evaluate each plan’s potential.
According to estimates by the pro-business Tax Foundation, under the most optimistic outcome, Trump’s tariffs would reach $2.5 trillion over 10 years. However, the group estimates that those revenues will cover only half of the tax cuts and spending proposals Trump has outlined.
Meanwhile, most predictions Harris’s economic plan shows a more balanced outcome for the US between increased revenue, tax cuts and spending plans.
Tariffs finally include concessions. There is never a line item on a big-box retailer’s receipt for the cost of the tariffs, but many economists believe that consumers will ultimately pay higher prices when tariffs are imposed, as businesses based on tariff invoices end up. pass the cost.
However, tariffs can support and even increase American jobs.
Take the Trump Administration’s 2018 tariffs on washing machines. According to the Coalition for a Prosperous Americaa bipartisan group that advocates for tougher foreign trade policies, the washing machine tariffs have created more than 2,000 jobs and boosted growth in two southern communities where Korean appliance makers have built factories to circumvent the tariffs.
But academic writing found The cost of these jobs reached approximately $815,000 per position, while laundry and equipment prices increased by 10%.
The washing machine tariffs were part of Trump’s sweeping new tariff regime aimed at protecting American workers from competitive Chinese trade practices. This resulted in what is generally regarded as a “trade war” involving retaliatory tariffs on American goods.
After the pandemic, the “war” died down a bit.
But this spring, when the Biden administration adopted its own tariff policies, some were continuations of those imposed by Trump. In May, for example, Biden announced a new set of tariffs on a range of goods, including steel and aluminum, as well as semiconductors, electric vehicles, batteries and solar panel parts.
The White House gave a similar rationale to the Trump administration when it announced the tariffs.
“American workers and businesses can outdo anyone as long as they have fair competition,” Biden said. “But for too long, the Chinese government has used unfair, non-market practices.”
Most economists agree that tariffs can support domestic industry. But they can also impose higher costs on the economy as a whole.
in 2018 interview Douglas Irwin, considered one of America’s preeminent business historians with the pro-business American Enterprise Institute, articulated the dilemma.
“There’s no denying that certain workers in certain industries are adversely affected by increased foreign competition,” he said, “but when you’re talking about the productivity gains that come from trade, I’d say America is better off, considering the benefits to exports and consumers.
“But,” Irwin continued, “it cannot be denied that certain groups are potentially worse off as a result of the lack of protection.”
Estimating the economic impact of tariffs often depends on assumptions and calculations that can produce widely divergent results. The Committee for a Responsible Federal Budget, a nonpartisan group, he wrote Trump’s 60% Chinese tariff proposal “would generate a net gain of $300 billion over ten years or a loss of $50 billion, depending on what share of Chinese imports are replaced by domestic and foreign goods.”
Committee he said The revenue-raising aspect of Trump’s proposal, totaling $2.5 trillion over 10 years, “would have a major fiscal impact and significantly slow the growth of the national debt.”
But the group added that this could have “significant economic implications”, such as lower purchasing power and increased business uncertainty.
Free trade advocates are in favor of directly negotiating terms with other countries, but even so, countries that the United States is friendly with are accused of violating such agreements. Mexico faces criticism over the claim violator A joint steel deal signed by Trump in 2019 has led to U.S. steel plant shutdowns, including in Ohio, New York and most recently on Chicago’s Southwest Side.
“Ohio steelworkers cannot wait for Mexico’s fraud to stop,” Sen. Sherrod Brown, D-Ohio, said in a joint statement in March with Sen. Tom Cotton, R-Ark. “Workers are losing jobs and Ohio companies are losing jobs now. When Mexico violates the rules they agreed to, the Administration must hold them accountable.
Officials of the companies responsible for the plant closings cited US inflationary pressures as the reason for the closings. A fight over the future of US Steel, whose plan is to be bought by a Japanese conglomerate now at risk of being blocked by the Biden administrationbut also related to broader economic forces that have long destabilized American manufacturing.
Nick Iacovella, senior vice president of public affairs at the Coalition for a Prosperous America, A trade group that defends the tariffs said that those who oppose the tariffs often wrongly assume that domestic production cannot be improved.
Special interest groups, he said, are often eager to spread reports that tariffs don’t work as a tool to justify “spent the last two or three decades offshoring manufacturing and jobs to countries with cheaper labor and lower environmental standards.” .
“There are many working-class Americans who have been harmed by offshore mining and unfair and illegal trade activities from China,” Iacovella said. “Our communities are being drained, including by free trade deals.”
But for every job protected as a result of tariffs, there is another domestic industry that could often result in job losses. According to economists at Harvard University and the University of California, Davis, Trump’s steel tariffs have affected businesses that use steel as an “input” to make finished goods, such as auto and equipment manufacturers.
“The job losses created by putting these steel-using industries at risk appear significant and far outweigh any jobs that would be created in the steelmaking industry as a result of the tariffs.” They wrote in the 2020 report.