Home » Trump Vows Massive New Tariffs if Elected, Risking Global Economic War

Trump Vows Massive New Tariffs if Elected, Risking Global Economic War

Even in the face of growing personal legal peril, Donald Trump summoned his top economic advisers to his private golf club in New Jersey for a two-hour dinner last Wednesday night to map out a trade-focused economic plan for his presidential bid.

Trump and top aides, including former senior White House officials Larry Kudlow and Brooke Rollins, as well as outside advisers Stephen Moore and former House speaker Newt Gingrich, spent the dinner discussing how Trump could attack President Biden in the 2024 election on the economy, amid a recent spate of positive economic news that has buoyed Biden’s fortunes, according to three people familiar with the meeting, who spoke on the condition of anonymity to describe the private event.

Among the ideas they discussed was Trump’s plan to enact a “universal baseline tariff” on virtually all imports to the United States, the people said. This idea, which Trump has taken to describing as the creation of a “ring around the U.S. economy,” could represent a massive escalation of global economic chaos, surpassing the international trade discord that marked much of his first administration. Trump advisers have for months discussed various potential levels to set the tariff rate, and they said the plan remains a work in progress with major questions left unresolved, the people said.

On Fox Business on Thursday, the former president called for setting this tariff at 10 percent “automatically” for all countries, a move that experts warn could lead to higher prices for consumers throughout the economy and could likely lead to a global trade war.

“I think we should have a ring around the collar” of the U.S. economy, Trump said in an interview with Kudlow on Fox Business on Thursday. “When companies come in and they dump their products in the United States, they should pay, automatically, let’s say a 10 percent tax … I do like the 10 percent for everybody.”

The proposed expansion of the tariff policy, which aides said is expected to be a central 2024 campaign plank, reflects how Trump is aiming to expand the power he wielded in the White House, eyeing sweeping authoritarian measures for his second term that range from deploying the military to fight street crime to purging the federal workforce. Trump is opting not to explain this vision to voters at the first Republican presidential primary debate, being held Wednesday. Trump said he will not attend.

Economists of both parties said Trump’s tariff proposal is extremely dangerous. Adam Posen, president of the Peterson Institute for International Economics, a Washington think tank, called the idea “lunacy” and “horrifying” and said it would lead the other major economies around the world to conclude the United States cannot be trusted as a trading partner. Although aimed at bolstering domestic production, a 10 percent tariff would hurt the thousands of U.S. firms that depend on imports, while also crippling the thousands of U.S. firms that depend on foreign exports, Posen said.

The United States today imposes an average tariff on imports of just above 3 percent, according to Posen. That number is higher for some countries, with goods coming from China facing an average import duty of 19 percent. “You would be depriving American families of an enormous amount of choice, making their lives much more expensive, and putting millions of people out of work,” Posen said.

Trump could use unilateral authority to exempt whatever countries he chooses from the automatic import tariffs. It would create enormous opportunities for influence-peddling, Posen said, following four years of a Trump presidency in which Saudi Arabia and other nations sought to steer Trump by frequenting his private businesses. “It is a recipe for corruption,” Posen said. “They will decide that whoever cozies up to Trump, or whoever his commerce secretary is, will get the exception.”

Even former Trump economic officials were sharply critical of the idea. “A tariff of that scope and size would impose a massive tax on the folks who it intends to help,” said Paul Winfree, an economist who served as Trump’s deputy director of the Domestic Policy Council and is now president of the Economic Policy Innovation Center, a center-right think tank. “It would get passed along through higher prices at a time when the Federal Reserve has had difficulty limiting inflation.”

Jason Miller, a spokesman for Trump, pushed back on the criticisms, pointing out that Trump’s tariffs had coincided with low inflation during his administration. Miller pointed to an International Trade Commission finding earlier this year that Trump’s steel and aluminum tariffs significantly led to a decrease in imports from China, with only minimal increases in prices.

“The globalists who push false claims of economic disaster have been proven wrong time and again,” Miller said in an email. “No amount of fearmongering from special interests and establishment hacks in Washington will stop him from defending American workers and fighting to return millions of manufacturing jobs to the USA.”

Although Republicans have long expressed confidence that they can effectively attack Biden’s economy, Trump’s team may find that task harder than initially anticipated. Inflation is falling, recession fears are abating and Biden’s aides are newly confident about the economic upswing that they hope will carry through the 2024 election.

Trump disrupted the bipartisan policy consensus in 2016 when he ran for president demanding the United States confront China through trade protectionism and other populist policies. As president, he used his unilateral authority to impose tariffs on a wide range of foreign products, including solar panels, washing machines, steel and aluminum.

In 2018, Trump escalated that strategy by slapping tariffs on $200 billion worth of imports from China, leading Beijing to impose retaliatory tariffs on U.S. agricultural exports. Trump also imposed tariffs on Mexico and Canada, before signing a new trade deal with the country’s North American allies in 2019. The legacy of these measures is hotly debated: Most economists said they hurt the U.S. market, contributing to global economic head winds and slowing business investment.

But most of the trade barriers Trump imposed on China were ultimately extended by the Biden administration, and they have been praised by influential unions for promoting domestic industry. Biden has taken economic measures that have fueled international trade tensions, including domestic subsidies for clean-energy firms that have been sharply criticized by the European Union.

Trump’s universal tariff plan, however, would represent a dramatic intensification of economic nationalism that could draw more significant reproaches from foreign governments, experts said. Two Trump aides, who spoke on the condition of anonymity to describe campaign deliberations, said no rate had been settled on for the policy.

The aides said the Trump campaign was likely to provide more details as the election season progresses. Trump has also said revenue raised by the tariff would be used to reduce taxes on domestic companies, although it would effectively be a tax on American consumers that would raise their costs.

“It will be controversial,” Gingrich said in an interview. Gingrich said the policy would amount to returning to Republican Party roots during the late 19th and early 20th centuries, when large domestic companies pressed for trade restrictions to reduce foreign competition. “When we were the dominant economy, free trade was the rational strategy. Whether that is still a rational strategy is unclear.”

The policy idea reflects how much Trump has changed the Republican Party, which had more recently been allergic to these kinds of trade restrictions. Robert E. Lighthizer, who served as U.S. Trade Representative under Trump, has suggested imposing a universal tariff at 10 percent or higher, and then increasing or decreasing it as necessary, but emphasized in an interview he was not tied to any specific numbers.

“We have had people across this country, in the Midwest but elsewhere too, where you drive through and you see this blight that is the result of U.S. policy that went off the rails in the 1990s,” Lighthizer said, arguing that Trump tried to reverse that decline through his industrial policy.

Chris Clarke, an economist at Washington State University, said the tariffs that Trump imposed on imported washing machines cost American consumers roughly $800,000 for every job saved. But later studies, which took into account the impact of retaliatory tariffs as well, found that the tariffs did not save any jobs, Clarke said.

“On net, this would harm the American economy substantially” and “would gum up our whole production process,” Clarke said. “Producers would have higher costs, and now all the consumers are paying higher prices for goods that used to be imported.”

Michael Strain, an economist at American Enterprise Institute, a center-right think tank, said international trade restrictions enacted in 1930 are widely viewed as exacerbating the Great Depression. Trump’s trade war had a chilling effect on the U.S. economy, Strain said, but if his new plan were enacted, it could have a far bigger impact.

“It would be a disaster for the U.S. economy. It would raise prices for consumers and be met with considerable retaliation from other nations, which would raise the costs facing U.S. businesses. It would reduce employment among manufacturing workers,” Strain said. “It would be very, very bad.”