Donald Trump dreams of new trade wars

(Washington) In March 2018, a day after hitting metal imports with high tariffs, President Donald Trump wrote on social media: “Trade wars are good and easy to win. »

During his term, Mr. Trump presided over the largest increase in U.S. tariffs since the Great Depression, hitting China, Canada, the European Union, Mexico, India and others. They retaliated with tariffs on American soybeans, orange juice, motorcycles and whiskey. American agricultural exports plummeted, prompting Mr. Trump to provide farmers with $23 billion in compensation.

Now, candidate Trump is promising to escalate his trade war. He advocates “universal base tariffs on most foreign goods,” higher still for countries that devalue their currencies. He’s talking about 10 percent tariffs on most imports and 60 percent or more on Chinese goods. With those revenues, he proposes to cut the federal income tax.

“Tariff Man” to the rescue

Mr. Trump, who has styled himself the “Tariff Man,” has long argued that tariffs would help American factories, eliminate the trade deficit and boost jobs.

His first tariffs targeted $400 billion worth of general imports (steel, solar panels, washing machines) and Chinese imports (smartwatches, chemicals, bicycle helmets, engines). He argued that taxing imports would boost U.S. manufacturing, reduce dependence on foreign goods, and help U.S. companies compete with cheap goods from China and other countries.

Yes, it reduced imports and boosted U.S. industrial production in some sectors, including steel, semiconductors, and computer equipment. But at a very high cost, which likely wiped out any gains. Studies show that tariffs raised prices for consumers and factories that depend on foreign inputs, while reducing U.S. exports targeted by other countries’ retaliatory measures.

If elected, Mr Trump plans to impose tariffs on imports 10 times more than during his first term, which could trigger a trade war that would drive up prices and plunge the United States into recession, economists warn.

According to David Autor, professor of economics at the Massachusetts Institute of Technology (MIT), these measures would have “a very large and almost instantaneous effect on prices.”

In a recent open letter, 16 Nobel Prize-winning economists wrote that they were “very concerned” about the risks Mr. Trump poses to the economy and the rule of law.

“We believe that a second Trump term would have a negative impact on the United States’ economic position in the world and a destabilizing effect on the domestic U.S. economy,” they wrote.

Mr. Trump and his supporters have a very favorable view of tariffs. They see them as leverage against foreign governments, a remedy for the trade deficit with China and a driver of manufacturing jobs.

“I really believe in prices. I think tariffs provide two things: an economic gain, but also a political gain,” Mr. Trump recently said on a podcast.

“Worthless Nobel Prizes”

“The American people don’t need worthless, out-of-touch Nobel Prize winners to tell them which president has put the most money in their pockets,” said Karoline Leavitt, a Trump campaign spokeswoman. “President Trump built the strongest economy in American history, and then, in just three years, Joe Biden’s unchecked spending created the worst inflation crisis in generations.”

Mr. Trump’s tariffs have support in the sectors that have benefited from them. Moreover, President Biden has maintained the tariffs targeting China. He even added more, notably on electric cars, steel and semiconductors.

But some industries that suffered from Mr. Trump’s trade wars don’t want to play that role again. In retail and spirits, there are concerns that a new round of tariffs will reignite tensions, raise their costs and lock them out of crucial export markets.

After Trump’s initial tariffs on steel and aluminum, the European Union retaliated with 25% tariffs on American whiskey, and spirits exports to Europe fell 20%. Tariffs targeting China have increased costs for retailers, who have had to pass the bill on to consumers or reduce their margins.

“We need a trade policy, not just more tariffs,” said David French, vice president of the National Retail Federation. His group, which represents department stores, e-commerce sites and grocery stores, ran a television ad campaign opposing Trump’s tariffs in 2018.

The positive or negative impact of tariffs on exports is evident when we look at what happened to sectors where trade peace returned under President Biden: in 2021, European tariffs on whisky were suspended after negotiations.

American whiskey exports to Europe increased from $439 million in 2021 to $705 million in 2023.

A government study found that tariffs on foreign steel and aluminum increased U.S. production of those metals by $2.2 billion in 2021. But U.S. factories that use steel and aluminum to make their products (cars, cans, appliances, etc.) paid more for their raw materials and their output fell by $3.5 billion that same year.

Studies suggest that the tariffs have had a mixed effect on jobs. In a recent paper, Mr. Autor and other economists found that the combined effect of Mr. Trump’s trade policies and other countries’ retaliatory measures was slightly negative for American jobs, or at best, zero.

When it comes to inflation, studies have estimated that U.S. households have faced higher prices because of the tariffs – from several hundred dollars to more than $1,000 per year.

This article was published in the New York Times.

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