Good morning. Today, we’re covering Trump’s tariff plan — as well as Matt Gaetz, the Middle East and banana art.
TRUMP’S AGENDA On tariffs
President-elect Donald Trump calls tariffs “the most beautiful word in the dictionary.” He has talked about them again and again as a fix for America’s economic relationship with the rest of the world. Tariffs are a charge on foreign products when they are brought across the border. By making foreign goods more expensive, tariffs encourage Americans to buy products from U.S. factories instead. For Trump, this is a way to spur American manufacturing, create new jobs and lower U.S. trade deficits. He used them liberally in his first term, taxing hundreds of billions of dollars’ worth of metals, solar panels and Chinese goods. While running for president this year, he proposed even larger tariffs — of 60 percent or more on China, and up to 20 percent on most goods from other countries. Some doubt whether Trump will follow through with these plans. But I think it’s safe to assume he’s serious about moving forward with some of them. The Morning is running a series on the policies Trump and his congressional allies may implement next year. In today’s installment, I’ll talk about his promise to impose tariffs.
Do they work?Trump advisers describe tariffs as a “core belief” for the president-elect. He has sung their praises for decades. Today he says they can also raise money to fund tax cuts and force other governments to make concessions on trade and immigration. Can tariffs accomplish these goals? Perhaps in part. They can certainly encourage more factory production, at least in the specific industries they shield: When the United States put tariffs on steel, clothing and kitchen cabinets in Trump’s first term, companies here generally made more of those things. The incoming president is right on a couple of points: First, tariffs do raise money for the government. The amount they generate has more than doubled since Trump first took office (though it is a tiny percentage of government revenue). Second, the United States has much lower tariffs than most other countries do. Both parties agree that some tariffs help protect industries against unfair competition from China. But tariffs also have downsides, and those can outweigh the economic benefits. Companies charge Americans more to pay for them. And they are regressive, meaning they place a higher burden on poor families than on rich ones. Tariffs can also backfire by hurting U.S. manufacturers. American factories use a lot of foreign parts and materials, and tariffs make it more expensive to get these. Trump’s steel and aluminum tariffs, for instance, got U.S. firms to make more metals — but because the price rose, other companies that use metals to make things, like industrial machinery and auto parts, ended up manufacturing less. Imposing tariffs on foreign countries also encourages them to do the same thing to the United States. Suddenly, American exporters lose markets abroad. That costs jobs. A powerful toolTrump has several ways to impose new levies right away. He could use an existing trade investigation from his first term to slap more tariffs on China, as President Biden did earlier this year. His advisers also argue he could quickly impose tariffs on other countries by declaring an economic emergency. This action might be vulnerable in court, but challenges often take years to unfold, and tariffs would probably continue in the meantime. There are a few reasons Trump might hold back. One is that he might try to include tariffs in a big tax bill next year. Then they’d be clearly legal — and impossible to change without another act of Congress. Another factor could be opposition from pro-business advisers or a plunge in the stock and bond markets. Would tariffs help or hurt the economy? It really depends on their size, and other countries’ reactions. Dani Rodrik, a Harvard University economist who has written about the harms of globalization, said that if tariffs were low, maybe 10 percent, Americans might just pay a bit more for their imports — not a huge deal. But if tariffs increase significantly beyond that, he said, it could lead to a 1930s-style trade war, in which countries keep retaliating against one another with higher and higher levies. The price of goods could rise quickly. In that scenario, Trump’s tariffs would likely hurt rather than help American workers.
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