Trump aims for bigger trade war in second term

In March 2018, a day after announcing sweeping tariffs on metals imported from both U.S. allies and adversaries, President Donald J. Trump said took to social media to share one of his central economic philosophies: “Trade wars are good and easy to win.”

As president, Mr. Trump presided over the largest increase in U.S. tariffs since the Great Depression, slapping heavy tariffs on China, Canada, the European Union, Mexico, India and other governments. They retaliated by imposing tariffs on U.S. soybeans, whiskey, orange juice and motorcycles. U.S. agricultural exports plummetedwhich prompted Mr. Trump to send 23 billion dollars to farmers to compensate losses.

Now that he is running for president again, Mr. Trump is promising to step up his trade war much further. He has proposed “universal base tariffs on most foreign products,” including higher levies on certain countries that devalue their currencies. In interviews he has suggested plans for a rate of 10 percent on most imports and a tariff of 60 percent or more on Chinese goods. He has also proposed cutting federal income taxes and relying instead on tariffs on income.

Mr. Trump, who once proclaimed himself “Tariff Man” has long argued that tariffs would boost American factories, close the gap between what America imported and what it exported, and increase American jobs.

His first round of tariffs targeted more than $400 billion in imports, including steel, solar panels, washing machines and Chinese goods such as smartwatches, chemicals, bicycle helmets and motorcycles. His reasoning was that import taxes would revive American manufacturing, reduce dependence on foreign goods, and allow American companies to better compete with cheap products from China and other countries.

Economists say the tariffs have reduced imports and boosted U.S. factory production for some industries, including steel, semiconductors and computer equipment. But that has come at a very high price, likely wiping out any overall gains. Studies show the tariffs resulted in higher prices for American consumers and factories dependent on foreign inputs, and reduced US exports for certain goods that were the subject of retaliatory measures.

Trump is now considering taxing perhaps 10 times as many imports as he did during his first term, an approach that economists say could unleash a trade war that would drive up already high prices and plunge the U.S. into a recession.

David Autor, an economics professor at the Massachusetts Institute of Technology, said the proposals would have “a very large effect on prices almost immediately.”

“I don’t think they will do it,” Mr. Autor said. “It could easily cause a recession.”

In a recent letter, 16 Nobel Prize-winning economists wrote that they were “deeply concerned” about the risks a second Trump administration would pose to the economy, inflation and the rule of law.

“We believe that a second Trump term would negatively impact the US economic position in the world and have a destabilizing effect on the US domestic economy,” they wrote.

Mr. Trump and his supporters have taken a much more positive view of tariffs, arguing that they provide leverage to foreign governments, reduce the trade deficit with China and result in economic growth. US manufacturing jobs.

“I happen to be a big proponent of tariffs because I think tariffs give you two things: they give you economic gain, but they also give you political gain,” Mr. Trump said. a recent podcast.

Karoline Leavitt, the Trump campaign’s national press secretary, said in a statement that “the American people don’t need worthless, outrageous Nobel Peace Prize winners to tell them which president has put more money in their pockets.”

“President Trump built the strongest economy in American history,” she said. “In just three years, Joe Biden’s out-of-control spending created the worst inflation crisis in generations.”

Jamieson L. Greer, a partner in King & Spalding’s international trade team who was involved in trade negotiations with China during the Trump administration, said the view of Trump officials was that tariffs “can help support U.S. manufacturing jobs in particular, especially to the extent that they correct an unfair trade practice.”

China has long had policies that disadvantage American workers, but other countries also have unfair trade and tax policies or misaligned currencies, Mr. Greer said.

“If you level that playing field, we ensure that Americans don’t have to compete unfairly,” he said.

Trump’s tariffs have domestic supporters among the industries that have benefited from them. And President Biden gave them his own endorsement by choosing to keep Trump’s tariffs on China and adding some of his own, including on electric cars, steel and semiconductors.

But some sectors hardest hit by Trump’s trade wars aren’t looking forward to a sequel. Executives in industries such as retail and spirits fear that another round of tariffs could reignite tensions, raise their costs and once again close off critical markets abroad.

Spirits exports to Europe fell 20 percent after the European Union imposed a retaliatory 25 percent tariff on American whiskey in response to the Trump administration’s tariffs on steel and aluminum. And China’s tariffs increased the prices retailers had to pay for their products, forcing them to raise prices for their customers or cut their profits.

“We need trade policy, not just more tariffs,” said David French, executive vice president of government relations at the National Retail Federation. His group, which represents department stores, e-commerce sites and supermarkets, ran a TV ad campaign against the Trump tariffs in 2018. “All they’ve done is add friction to the supply chain and cost consumers $220 billion.”

“Former President Trump views trade as a kind of zero-sum game: If you win, I lose and vice versa,” Mr. French said. “That’s really not the way trade works.”

The power of tariffs to help or hinder exports is evident in sectors that were ultimately reprieved. In 2021, whiskey tariffs were temporarily suspended as part of a deal the Biden administration struck with the European Union. U.S. whiskey exports to the bloc rose from $439 million in 2021 to $705 million last year.

Chris Swonger, the CEO of the Distilled Spirits Council of the United States, said he was hopeful that if re-elected, Trump would appreciate that strong U.S. spirits exports would help achieve his goal of reducing the trade deficit. The lobby group wants the suspension of EU tariffs, which expires next March, to be extended.

“For President Trump, we obviously appreciate and respect his efforts to reduce the trade deficit,” said Mr. Swonger, who has made his case to Trump campaign officials. “Imposing tariffs on spirits would be antithetical to reducing the trade deficit.”

Research shows that while the tariffs achieved their goal of increasing domestic production in the sectors they protected, they came at other costs to the U.S. economy.

One independent 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 other things, like cars, cans and appliances, had to pay higher costs for their materials, and that reduced those factories’ output by $3.5 billion in the same year.

Studies suggest that the tariffs also had a mixed record when it came to jobs. In a recent paper, Mr. Autor and other economists found that the cumulative effect of Mr. Trump’s trade policies and other countries’ retaliatory measures was a modest negative for American jobs, or at best a wash.

As for inflation, studies have estimated that American households faced higher prices as a result of the tariffs – from several hundred dollars to more than $1,000 per year.

However, economists say consumers likely did not connect the higher prices they paid to the tariffs, as inflation was low during Trump’s term and the economy was strong.

While the economy remains robust, prices have risen sharply since 2021 and inflation remains high. That could make tariff-induced price increases more obvious and painful this time around.

A recent analysis from the Peterson Institute of International Economics found that if Trump were to impose a 10 percent tariff on all goods and a 60 percent tariff on China, it would cost an average household in the middle of the income distribution about $1,700 in increased expenses annually.

Another analysis, by the right-wing American Action Forum, estimated that a 10 percent tariff could add as much as $2,350 to the annual cost per American household. Adding a 60 percent tariff to China would add another $1,950 to American household spending.

The burden of these tariffs would fall more heavily on poorer households, as they spend a larger share of their income on staple goods.

That could ultimately backfire for Trump, as voters’ concerns about inflation are paramount.

As he waited in line to attend Trump’s rally on Saturday in Philadelphia, Paul Rozick, an electrical warehouse manager from Bensalem, Pennsylvania, said high grocery and gasoline prices had outpaced his pay increases.

“Inflation is up 20 percent, but our salaries are up 2 percent,” Mr. Rozick said. “I have less money in the bank because I’m spending more money when I go out.”