Dive Brief:
- Former President Donald Trump’s proposed 10% tariff on imports would shrink the U.S. economy 1.1%, threaten 825,000 jobs and impose an annual tax on consumers exceeding $300 billion, the Tax Foundation said.
- An across-the-board import tax favored by Trump would also increase costs for U.S. businesses, reduce production and, in turn, imperil profits and worker wages, according to Tax Foundation Senior Economist Erica York.
- Trump’s tariff on foreign goods sold in the U.S. would likely trigger widespread retaliation by trade partners and undercut U.S. exports, which totaled $2.1 trillion last year. The import tax would “threaten the entire system of global trade we currently enjoy,” York said in a report.
Dive Insight:
Trump as president imposed nearly $80 billion in tariffs on thousands of imports from China, including washing machines, steel, solar panels and aluminum. President Joe Biden has maintained most of the duties.
The tariffs targeting China and other countries have backfired, reducing long-run gross domestic product by 0.21 percent, wages by 0.14 percent and employment by 166,000 full-time equivalent jobs, the Tax Foundation said.
“They have destroyed U.S. manufacturing jobs, harmed U.S. farmers, raised prices for U.S. consumers and alienated our allies — all without changing China’s unfair trade policies or reviving protected domestic industries,” York said.
“We know from decades of experience and evidence that tariffs reduce employment, productivity, and output,” according to York. “It appears that lesson has not been learned.”
Trump in an Aug. 18 interview with Fox News said, “I think we should have a ring around the collar” of the U.S. economy.
“I think when companies come in and they dump their products in the United States, they should pay automatically, let's say a 10% tax,” Trump said. The tariff would protect U.S. jobs, generate revenue for trimming the federal debt and prompt trade partners to lower tariffs on U.S. exports, he said.
“I do like the 10% for everybody,” Trump said.
A global tariff war would shrink a country’s GDP, on average, by 2.8%, according to research by Ahmad Lashkaripour, an associate professor of economics at Indiana University.
U.S. GDP would decline 1.1%, while small countries more dependent on trade such as Estonia, Ireland, Latvia and Bulgaria would suffer much more, he said.
In 1930 President Herbert Hoover signed the Smoot-Hawley Tariff Act in one of the most self-destructive trade initiatives in U.S. history.
The law prompted retaliation by trade partners. U.S. imports and exports plummeted, speeding a tailspin into the Great Depression.
