Former President Donald Trump is promising to tighten one of his signature trade policies — tariffs — if he is re-elected in November, imposing across-the-board duties of 10% on all products imported into the US from abroad. The idea, him saidis to protect American jobs and raise more revenue to offset an extension of his 2017 tax cuts.
But that proposal would likely backfire and essentially act as a tax on American consumers, economists across the political spectrum say. If the tariffs are implemented — with Trump also proposing a 60% or more levy on Chinese imports — a typical middle-class household in the U.S. would face an estimated $1,700 a year in additional costs. according to at the nonpartisan Peterson Institute for International Economics.
Meanwhile, the left-wing Center on American Progress has done the same crunched the numbers and expect about $1,500 per year in additional costs for the average household. The reason, experts say: U.S. companies that import goods from abroad typically pass on the cost of tariffs to American consumers; In connection with this, domestic manufacturers often raise their own prices.
Who would pay the price?
According to Kimberly Clausing and Mary Lovely of the Peterson Institute, the biggest impact of higher tariffs would likely fall on low- and middle-income consumers, who spend a larger share of their income on goods and services than wealthier Americans.
“If you're an economist, you immediately know that tariffs are taxes. If you put a tariff on imported goods, it means they become more expensive” and competitors can raise their prices, Clausing told CBS MoneyWatch.
Trump is selling “snake oil,” Lovely added. “It's really on steroids, and you have to talk a little louder and say, 'This is really going to affect you.'”
The bottom line, both Clausing and Lovely say, is that Trump's tariff proposals would likely raise consumer prices, a concern after two years of rising inflation. The typical American household would feel the biggest pinch from materials and goods purchased by American companies, such as lumber for construction, which will be passed on to them through $610 in additional annual costs, the Center on American Progress analysis estimates .
Middle-class households would also pay $220 more per year for cars and other vehicles, $120 more for gas and other oil products, and $90 per year in additional food costs, according to the policy analysis firm.
Trump campaign spokesman Steven Cheung did not respond to requests for comment.
Tariffs have long been used to advance U.S. trade policy by both the right and left, and to curry favor with labor unions. And Americans generally support tariffs because they believe they protect American jobs from foreign manufacturers.
In practice, policymakers tend to apply targeted tariffs that serve to protect a specific industry or product. President Joe Biden, for example, last month new rate about Chinese electric vehicles, semiconductors, batteries, solar cells, steel and aluminum. The goal is to prevent China from doing that Undermining American companies and threatens domestic manufacturing jobs, the Biden administration said.
“The fundamental thing is that people see tariffs as job savings and say, 'It's going to cost me a little more and I want to do that because I want to help steelworkers,'” Lovely said. But she added: “We see a lot of misunderstandings about how trade works and what tariffs mean for people.”
Do Tariffs Protect Jobs?
Lovely and Clausing point to existing evidence about the impact of tariffs Trump implemented during his presidency, when he tariffs on Chinese goods like Mexican products. But instead of protecting jobs, the displacement of American jobs continued during Trump's presidency. according to to Reuters, citing data from the Ministry of Labor.
“People are sold a bill of materials, but the data shows it doesn't help them in their daily lives,” Clausing said. “That's the hard thing about being an economist: everything is right and people say, 'No, the rates seem right.'”
Renowned MIT economist David Autor and his co-authors said in a January research paper that Trump's 2018-2019 trade war “has thus far failed to provide economic relief to America's heartland,” and has failed to increase employment in sheltered sectors. In fact, retaliatory tariffs from countries targeted by the Trump administration had the effect of “clear negative impacts on employment, especially in agriculture,” Autor found.
The only success of Trump's trade war, Autor concluded, was political. “Residents of regions more exposed to tariffs were less likely to identify as Democrats, more likely to vote for Donald Trump's re-election in 2020, and more likely to elect Republicans to Congress,” the researchers wrote.
It's likely that many Americans didn't notice the price increases during Trump's 2018-2019 trade war because they were more targeted than a blanket 10% tariff, Lovely and Clausing said.
“If you look at the imports that Trump targeted during his presidency, it was maybe a tenth of the trade, and companies like Walmart could have spread some of those price increases across goods, so it's really not transparent,” Clausing said . . “My prediction is that if the worst happens and he puts a 10% tariff on everything, people will notice.”
