Since I criticized Biden's "shrinkflation" public service announcement earlier this week, I only thought it would be fair that I criticize President Trump today and his role in increasing consumer prices. Trump has been obsessed with tariffs to the point of earning the nickname of "Tariff Man." During his first term, he quadrupled U.S. tariffs on China, from 3 percent to 12 percent. Now he is looking to outdo himself. Earlier this month, Trump proposed a 60 percent tariff on China, although he said it could very well be higher.
We should first ask how well the tariffs fared under Trump's previous presidential term. I asked this question when I criticized Trump's proposal for a 10 percent tariff on all countries last year. The answer to the question: not well. Tariff proponents think that tariffs hurt the other country, which in this case would be China. Trump's tariffs really didn't stick it to China. The truth is that a U.S. tariff on China is an import tax that U.S. consumers and producers paid, as this report from the United States International Trade Commission shows. During his first term, the annual net costs of Trump's tariffs were a reduction of GDP by 0.21 percent, wages being reduced by 0.14 percent, and 166,000 fewer full-time equivalent (FTE) jobs. As one research paper from the Federal Reserve concluded, "the impact from the traditional import protection channel is completely offset in the short-run by reduced competitiveness from retaliation and higher costs in downstream industries."
What effects would quintupling the current tax rate have? The Tax Foundation calculated that such a tax would cost $200 billion per annum. The National Taxpayers Union estimates that figure at an even-higher $495.7 billion, which would amount to an average tax of $3,942 per household. That is even worse considering that the New York Federal Reserve found that Trump's previous China tariffs cost the average household $831 per annum. As the Tax Foundation correctly points out, such a tariff would not be created with the primary goal of tax revenue collection, but discouraging trade:
Imports from China would depress significantly. Supply chains would fragment, investment plans would be disrupted, and trade would be diverted to third countries. A prohibitive tariff would create a void in trading opportunities with China that other countries would fill, leaving the U.S. excluded. In sum, it is not a thoughtful approach to the U.S.-China economic relationship.
Insanity is defined as trying the same thing over and over again while expecting the same results. Trump's tariffs were a failure beforehand. A more self-aware man would back off and try something more constructive and successful. But that is not what Trump is doing. He is more than doubling down since he is looking to quintuple the tariff rate on Chinese goods. Rather than keep the U.S. on the global stage, Trump's China tariffs would set the U.S. economy further back.
Although Congress has historically been responsible for tariffs, that responsibility has shifted more to the executive branch in the past century. There are ways to repeal those provisions that allow for executive abuse, as this report from the Competitive Enterprise Institute illustrates. Congress needs to take back its constitutional role of determining tariff rates. Otherwise, what we will see in the event of a second presidential term with Trump is even higher consumer prices than we already have while harming U.S. consumers, farmers, and manufacturers along the way.
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