Former
president Donald Trump is weighing options for a major new economic
attack on China if reelected, considering plans that are widely viewed
as likely to spark a global trade war.
Publicly, the GOP front-runner
has endorsed downgrading China’s trade status with the United States — a
move that would lead tariffs between the world’s two largest economies
to skyrocket. Revoking China’s status as a “most favored nation” for
trade — which is applied to almost all countries the United States
trades with — could lead to federal tariffs on Chinese imports of more
than 40 percent, according to one analysis. Trump has floated imposing a
10 percent tariff on nearly all $3 trillion in annual imports from all
countries, including China.
Privately,
Trump has discussed with advisers the possibility of imposing a flat 60
percent tariff on all Chinese imports, according to three people
familiar with the matter who spoke on the condition of anonymity to
relay private conversations.
All these options would lead to
enormous disruptions to the U.S. and global economies that would far
surpass the impact of the trade wars of Trump’s first term, economists
of both parties say. Although he often praised Xi Jinping as president
and signed a 2020 trade deal with China, Trump now repeatedly bashes
Beijing on the campaign trail and has promised a tougher stance than
President Biden.
Trump’s determination to ratchet up trade
fights with Beijing reflects the emerging economic stakes of the 2024
election, as the former president appears increasingly sure of winning
the GOP nomination. Trump has floated some fanciful new ideas for his
second term — like building “Freedom Cities” in different parts of the
United States with flying cars — but has primarily focused on
intensifying policies he pursued during his first term, such as a severe
immigration crackdown, cuts to corporate taxes and disruptive new
tariffs on U.S. trading partners.
“The 2018 to 2019
trade war was immensely damaging, and this would go so far beyond that
it’s hard to even compare to that,” said Erica York, senior economist at
the Tax Foundation, a right-leaning think tank that opposes the
tariffs. “This threatens to upend and fragment global trade to an extent
we haven’t seen in centuries.”
A Trump campaign spokesman did not return requests for comment.
Biden
has largely maintained the tariffs that Trump imposed on China as
president in 2018 and has also imposed new restrictions on the Chinese
economy, including new limits on semiconductors and other manufacturing
equipment.
Trump, however, is promising to go even
further. In the White House and on the campaign trail, Trump has argued
that tariffs on imports bolster domestic industry while raising money
for the federal government, ignoring — or dismissing — economists of
both parties who say they raise costs for U.S. consumers and producers.
Trump repeatedly boasts of bringing in billions of dollars to U.S.
coffers through the tariffs of his first term, though he added roughly
$8 trillion to the national debt during his first term through higher
spending and tax cuts. He also approved roughly $30 billion in a bailout
to compensate farmers who had been hurt by retaliatory tariffs imposed
by China.
Despite tariffs’ destabilizing impact on the
global and U.S. economies, Trump has promised to dramatically expand
their use in a second term. He has floated enacting a “universal
baseline tariff” on virtually all imports, or roughly $3 trillion worth
of goods, which would amount to more than a ninefold increase in the
amount of goods subject to tariffs compared with his first term. He has
also talked about pushing legislation to have the United States
automatically impose “reciprocal” tariffs matching those of all
countries on U.S. exports, which would almost certainly lead to a sharp
rise of trade hostilities.
But Trump’s plans for China may be the
most dramatic — and disruptive. Both publicly and privately, Trump has
talked about his China tariffs as a key accomplishment of his first term
— despite the opposition of many Republican officeholders — and vowed
to double down on that approach if elected again.
China
was the third-largest U.S. trading partner as of November, behind only
Mexico and Canada, accounting for 11.7 percent of total U.S. foreign
trade.
“I took on Communist China like no
administration in history, bringing in hundreds of billions of dollars
pouring right into our Treasury when no other president had gotten even
literally 10 cents out of China,” Trump said in New Hampshire before he
won that state’s primary contest. “Nobody even tried. We took in
hundreds of billions of dollars.”
Most economists say
these costs were primarily paid by U.S. consumers and firms, not by
China’s government or the Communist Party.
U.S.
consumers and firms would probably bear the brunt of a renewed China
trade war. In a report commissioned by the U.S.-China Business Council,
Oxford Economics found in November that ending permanent normal trade
relations with China would cost the U.S. economy $1.6 trillion and lead
to more than 700,000 lost jobs. Several prominent congressional
Republicans have also endorsed this measure, though.
The
United States imported roughly $550 billion of products from China in
2022, the most recent year with data available. The current average
tariff rate on those goods was about 12 percent — Trump imposed 25
percent tariffs on roughly $150 billion in goods, and an additional 7.5
percent on another $100 billion, while the remaining imports from China
were taxed at a roughly 2 or 3 percent rate on average, York of the Tax
Foundation said.
Adam Posen, president of the Peterson
Institute for International Economics, a Washington think tank, has
called Trump’s trade proposals “lunacy” and argued that this kind of
crackdown on Chinese imports would hurt U.S. firms by depriving them of
billions of potential customers.
“If a Trump administration were to
put up much higher tariffs on imports from China, American companies
would lose most of their market share in both China and many third
countries,” Posen said.
Trump and his defenders often
argue that the tariffs primarily serve as a strategic tool to force
foreign adversaries to adjust deceptive trade practices. Policymakers of
both parties now argue that China’s economic policies — including
artificially devaluing its currency to support exports — have undermined
U.S. manufacturing, and Trump sometimes discusses tariffs as a way to
force Beijing to change course.
“He believes the
tariffs he imposed in his first term raised a great deal of revenue for
the American people,” said Newt Gingrich, the former GOP House speaker
and an outside adviser to the former president. “I know from personal
conversations with Trump that he believes deeply that having the tool of
tariffs allows you to negotiate from a position of strength, because we
still have the largest market in the world.”
The Tax
Foundation found that the Trump tariffs — most of which were kept in
place by the Biden administration — reduced long-term wages by 0.14
percent and employment by 166,000 jobs. The Coalition for a Prosperous
America, a group that supports the tariffs, has found that they help
drive domestic investment with minimal impact on prices.