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Trump’s Tariffs Would Raise Prices, Harm U.S. Workers, and Make It Harder To Solve Global Problems [1]

['Ryan Mulholland', 'Mike Williams', 'Associate Director', 'Media Relations', 'Senior Director', 'Government Affairs']

Date: 2025-01

The incoming Trump administration is likely to impose significant tariffs on U.S. imports to an extent not seen since before World War II. The president-elect has already announced that he will use emergency executive authority on his first day in office to impose 25 percent tariffs on Canada and Mexico, the United States’ closest trading partners, and a 10 percent tariff on Chinese goods. And given that he campaigned on an across-the-board tariff and a massive China-specific tariff, this is likely just the beginning. Donald Trump may couch his tariff proposals in the language of “America first” or as fighting back against the ills of global trade, but the tariff ideas he has proposed will not make the economy fairer, bring prosperity to working people, protect the environment, or improve climate sustainability—and what’s worse, they are not even designed to do so. Yet the most common critique of Trump’s tariff agenda fails to make this point, focusing instead on the price increases likely to face American consumers instead of the negative impact Trump’s economic agenda will have on working people, the environment, and global efforts to address challenges such as climate change.

More alarmingly, critiques based on price alone fall into the trap of equating sound trade policy with advancing the needs of consumers, who care only about lowering prices. If articulated poorly, such critiques can even appear to argue against tariffs in any form, which is unhelpful given the need to use tariffs to address the inequities of modern global trade and the unfair trade practices of others, as well as to reward private sector investments in decarbonization. It is the same trap that policymakers fell into through decades of deregulation, liberalized trade, and tax cuts. And it is a line of argument that plays into Trump’s political calculus, since most voters view his tariff threats as him standing up for their jobs and livelihoods, and they discount any future price increases that his tariffs may facilitate.

Trump’s tariffs should be opposed not just because they increase costs for average Americans, but because they are so clearly bad for workers and the country’s long-term interests.

Trump’s tariffs should be opposed not just because they increase costs for average Americans, but because they are so clearly bad for workers and the country’s long-term interests. It is telling that the incoming Trump administration seems to view tariffs as the solution to every problem: In their view, tariffs can be used to stop the flow of migrants and illegal drugs, punish China, stop countries from trading in nondollar-denominated currencies, and eliminate the income tax. Yet none of Trump’s tariff proposals are designed around the values, needs, or aspirations of working people, nor are they built for the realities of 21st-century trade, including interconnectivity, digitalization, competition from nonmarket economies, or the need to use trade as a tool in the fight against climate change.

The folly of Trump’s across-the-board tariff proposals Trump’s across-the-board tariff proposal, which he first proposed as a 10 percent tariff on all imports and later suggested could increase to 20 percent, is a good example of how Trump’s tariff ideas are so counterproductive to U.S. workers and the country more broadly. First, an across-the-board tariff would tax all imports from adversaries and allies alike, making it difficult to differentiate between those exporters from a particular market that meet the highest standards, and thus deserve to be rewarded with preferential access to the U.S. consumer market. It would also make it harder to work with international partners to improve the resilience of supply chains, decarbonize production patterns, or increase workers’ rights. The latter is problematic since nearly all global problems—whether inequality, climate change, migration, or competition with nonmarket economies—require coordination with like-minded partners to address successfully. Second, the events of Trump’s first term demonstrate that world leaders learned quickly that their “tribute” could be paid in the form of a positive headline that plays to Trump’s self-image, rather than in the form of actual commitments that would improve U.S. competitiveness. The Phase 1 trade deal that the first Trump administration made with China, and that Trump called a “momentous step … toward a future of fair and reciprocal trade,” is a perfect example. China bought none of the additional $200 billion in U.S. exports that it had promised to buy. Beijing simply told Trump what he wanted to hear, allowed him to tout the deal to U.S. farmers and manufacturers, and then ignored its commitments, knowing full well that Trump wouldn’t care about the details and that he and the media cycle would lose interest. Third, while the incoming Trump administration may expect that world leaders will come to them hat in hand, offering bilateral concessions if the United States would remove tariffs on their exporters, the reaction of many governments could be noticeably different. In a world defined by dissatisfaction with incumbents, a 10 percent penalty on one’s exporters may prove to be politically useful to world leaders, who would have an obvious person (Trump), country (the United States), and policy (tariffs) to blame for their country’s challenges. Political leaders may conclude that it is better for them to make a public show of their unwillingness to kowtow to Donald Trump than it is to negotiate away a tariff on their exporters. This would be especially true if the private sector deemed a 10 percent or 20 percent tariff too small to alter the economics of where goods are produced and traded from. This would only make imported goods cost more expensive—not just for consumers, but also for all those manufacturers that rely on global supply chains to fuel their production in the United States. In fact, because Trump’s across-the-board tariff idea would treat every exporter the same, there may be little incentive for countries to offer concessions of any kind or for companies to move production from one place to another, since the competitive position of any particular company or country would remain unchanged. Though unlikely, world leaders may even choose to work with each other to collectively oppose the tariffs, rather than bilaterally with the United States to remove them. It should not be surprising, for example, that champions of liberalized trade have already announced new deals as they seek to define themselves in opposition to Trump’s tariff-heavy trade policy and to ensure a consistent supply of the materials and inputs their manufacturers need to compete in an integrated global market. The net effect of this will be to further isolate the United States on the world stage and make it harder for U.S. manufacturers to sell their goods abroad, placing even more pressure on the wages and benefits of factory workers across the country.

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Fourth, Trump’s across-the-board tariff would likely cause foreign governments and foreign consumers to retaliate against American goods and American companies. World leaders are already signaling their willingness to be aggressive in their use of retaliatory measures, either through tariffs of their own or through actions in a different sphere of competition or influence. By making trade policy such a nationalistic enterprise, the incoming administration is inviting retaliation against symbols of U.S. trade, including U.S. companies operating abroad and imports of U.S.-made or -grown goods. Neither would be helpful to the 10 million U.S. workers whose jobs are supported by exports from the United States. Finally, and perhaps the main reason why his across-the-board tariff is so ill-conceived, the incoming Trump administration’s focus on extracting bilateral concessions would do nothing to position U.S. industry to be more competitive in the future. Revenue generated from tariffs is deposited in the U.S. Treasury; it is not used to finance the build-out of U.S. manufacturing competitiveness, train workers for the jobs of tomorrow, or support increased research and development. These plans would therefore protect the profits of a few CEOs—many of whom are likely to also receive massive tax cuts—with absolutely no guarantee that additional trade protection will result in higher wages for workers, better benefits, or improved working conditions.

The Biden administration created nearly 800,000 new manufacturing jobs and facilitated $1 trillion in private sector investment in American manufacturing precisely because it paired strategic tariffs with federal investments in the U.S. industrial base’s ability to make the products that will define the future.

Trump’s chaotic approach to trade policy limits the job-creating potential of American manufacturing Trump’s seemingly arbitrary approach to trade policy is itself an impediment to the long-term investment needed to rebuild and revitalize American manufacturing and the jobs that go with it. Good and consistent policy facilitates investment, and the incoming Trump administration has not offered either. If President-elect Trump’s first term is any indication, business leaders and his own government officials are likely to be surprised by late-night social media tariff announcements that could—if implemented—dramatically alter the economics of producing in the United States or elsewhere. And, given the significant up-front capital cost of building new manufacturing plans or expanding existing facilities, this lack of predictability serves as a disincentive for firms to invest the type of capital needed to create well-paying, community-sustaining jobs, or to rebuild key parts of critical supply chains. Fewer still will invest if the Trump administration pairs its chaotic trade policy with a removal of the investment incentives enacted by the Biden administration, which have been so successful in creating new manufacturing jobs across the country.

A better approach Importantly, the absurdity of Trump’s tariff ideas should not distract from the fact that smart, targeted, and thoughtful tariffs can and ought to be part of a trade and industrial policy agenda. The contrast for progressives to draw is not between Trump’s harebrained tariffs and a tariff-free return to the neoliberalism of a now-bygone era. Instead, it is between Trump’s harmful, misguided tariffs and a different approach that uses tariffs to make the U.S. economy more secure, U.S. workers more prosperous, and the climate more sustainable. CAP recently described what such an alternative approach to trade policy could entail, including the innovative idea that tariffs should increasingly be assessed at the firm level, based on the decisions that individual companies make in regard to how well they treat their workers, decarbonize their supply chains, and protect the environment. Rarely are exporters wholly of one market, but instead operate in different markets simultaneously and import component parts and materials from around the world to fuel their production. Trade policy should reflect this reality.

Read more

A Trade Strategy for the Post-Neoliberal World Report October 23, 2024 A Trade Strategy for the Post-Neoliberal World Ryan Mulholland

As an example, rather than impose a tariff on all products exported from China, it would be better for American workers if a tariff were enacted based on the carbon intensity of the import, allowing American producers and their workers to capitalize on their existing “carbon advantage.” Better yet, the United States could lead the development of a multilateral trade agreement that rewards low-carbon suppliers with better tariff rates and thus new export opportunities, while also erecting a common defense against metals and other imports produced with the benefit of nonmarket policies or that contribute to global overcapacity.

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[1] Url: https://www.americanprogress.org/article/trumps-tariffs-would-raise-prices-harm-u-s-workers-and-make-it-harder-to-solve-global-problems/

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