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 vows massive new tariffs if elected, risking global economic war
The former president floats a 10 percent tax on all foreign imports, calling for a ‘ring around the collar’ of the U.S. economy
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 creating 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’s advisers have for months discussed various potential levels to set the tariff rate, and they say the plan remains a work in progress with major questions left unresolved, the people said. On Fox Business on Thursday, the former president publicly 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 likely lead to a global trade war.
“I think we should have a ring around the collar” of the U.S. economy, Trump told 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 say 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 GOP presidential primary debate, being held Wednesday; Trump will not attend.
Economists of both parties say Trump’s tariff proposal is extremely dangerous. Adam Posen, president of the Peterson Institute for International Economics, a D.C.-based think tank, called the idea “lunacy” and “horrifying” and said it would lead the world’s other major economies to conclude that 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 export markets, Posen said.
Currently, the United States imposes an average tariff on imports of just above 3 percent, according to Posen. That number is higher for some countries, with Chinese goods facing an average import duty of 19 percent.
“You’d 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. That 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’s a recipe for corruption,” Posen said. “They’ll 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.”
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 presidential election.
Trump disrupted the bipartisan policy consensus in 2016 when he ran for president demanding that the United States confront China’s rise 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 agreement with the country’s North American allies in 2019.
The legacy of these measures is hotly debated: Most economists say they hurt the U.S. economy, 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 several 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 say.
Two Trump aides, speaking on the condition of anonymity to describe campaign deliberations, said no percentage had been settled on for the policy. They said the campaign was likely to provide more details as the campaign 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 the GOP’s roots in 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’s still a rational strategy is unclear.”
The policy idea reflects how much Trump has changed the GOP, which had more recently been allergic to these kinds of trade restrictions. Robert E. Lighthizer, who served as the United States Trade Representative under the Trump administration, 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’ve 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 had tried to reverse that decline through his industrial policy.
Chris Clarke, an economist at Washington State University, said the tariffs 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 … It 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 the 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.”
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