Donald Trump has vowed to impose 25 percent tariffs on imported goods from Mexico and Canada unless, he says, those neighbors stem the flow of illegal migrants and drugs into the United States. Chinese imports, he adds, will be taxed an extra 10 percent unless Beijing cracks down on the production of the narcotic fentanyl.
Perhaps Trump is bluffing; it’s always hard to separate his bluster from his true intentions. But if he carries out his threats, the big losers will be American consumers – including a great many people who voted for him.
As Canadian Prime Minister Justin Trudeau said recently, “I think people south of the border are beginning to wake up to the real reality that tariffs on everything from Canada would make life a lot more expensive.”
Chinese President Xi Jinping had a similar take: “Tariff wars, trade wars, and technology wars go against historical trends and economic rules, and there will be no winners.”
There is a larger question here: How will Trump approach economic decisions – indeed, all critical policy choices – during his second term? Will he pay attention to “real reality” and “historical trends”? Or will he root his judgments in falsehoods and in campaign slogans that delight his voters but defy validity?
The early signs are not encouraging, since he told the Economic Club of Chicago in October: “The word ‘tariff’ is the most beautiful word in the dictionary. I think it’s more beautiful than ‘love.’ … I love tariffs!”
But “the vast majority of credentialed economists” feel differently, writes the independent fact-checking website PolitiFact. These experts “say consumers in the tariff-levying country lose in these deals, paying higher prices directly for foreign goods, and indirectly because of higher prices for foreign-sourced raw materials used in domestic goods. Also, if the other country retaliates by raising tariffs on U.S. goods, sales can decline for U.S. producers.”
If Trump does follow through, for example, food prices would shoot up because Americans get more than half of their fresh fruits and vegetables from Mexico. Construction costs would rise, as well, because one-quarter of the lumber used in the U.S. comes from Canada.
This is not guesswork. Trump tried tariffs, on a much lower scale, during his first term, and while he maintained on NBC’s “Meet the Press” that those duties “cost Americans nothing,” PolitiFact labels his assertion “false.”
So do most economists, including Alan S. Blinder of Princeton, who wrote in the Wall Street Journal: “No matter how many times Mr. Trump denies it, tariffs are (discriminatory) sales taxes. Discriminating against imported goods is their purpose. Sales taxes, of course, raise prices for consumers, and research says American consumers have paid for almost 100 percent of recent tariff hikes.”
The United States International Trade Commission, a bipartisan entity that analyzes trade issues, studied Trump’s record, and Bloomberg summarized its findings: “U.S. importers bore almost the entire burden of tariffs that Donald Trump placed on more than $300 billion in Chinese goods during his presidency, raising costs for American companies. …
“The conclusions back the longtime assertion of U.S. Chamber of Commerce and independent academic economists that the cost of the tariffs hurt American firms, and contradict Trump’s claim that China paid the ultimate cost of the duties,” reported Bloomberg.
Republicans who actually study economic rules have tried, and failed, to dissuade Trump from his faith in tariffs. “No country has ever tariffed its way to prosperity,” wrote former Sen. Pat Toomey of Pennsylvania, a Republican, in the Wall Street Journal. “I understand the emotional appeal of trade-rules reciprocity – it satisfies an urge for revenge. But that revenge will be less satisfying for the working-class Americans facing unemployment and higher prices if Mr. Trump carries through on his import-tax promises.”
Tariffs are only one example of Trump’s counter-factual approach to economic decision-making. He claimed that the massive tax cuts he engineered in 2017 would not only pay for themselves, but generate a surplus. “We’ll start paying off that debt like water,” he declared.
But that assertion, like his claims on tariffs, turned out to be dead wrong. The Congressional Budget Office estimates that Trump’s tax policies will actually add $1.9 trillion to the national debt over 10 years, and if the law’s temporary reductions in estate and income taxes are made permanent, they would cost another $400 billion a year starting in 2027.
“Real reality” and “economic rules” cannot be ignored. If Trump insists on doing that, if he embraces the fantasies of “alternative facts,” then all American families will pay the price.
Steven Roberts teaches politics and journalism at George Washington University. He can be contacted by email at [email protected].
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