More than a few conservative intellectuals have warmed to Donald Trumps trade protectionism because it supposedly helps blue-collar Americans. But what if his tariffs do the opposite?
Erica York at the Tax Foundation crunched some numbers recently showing that Mr. Trumps proposal for a 25 percent tariff on imported cars, trucks and parts could eliminate half of the income gains from tax reform for millions of Americans. Those in the lowest income quintile could lose 49 percent of their tax gains. Say for ease of calculation that these folks received a $100 after-tax bonus from changes like the doubled standard deduction. After auto tariffs that would be whittled down to $51, Ms. York notes.
The tariffs shave gains in all income brackets, but no one is hurt more than the poor and middle class. Take the fourth income quintile, or a household making at most
about $70,000 a year in adjusted gross income. The Tax Foundation says auto tariffs could erase nearly 30 percent of that familys after-tax income bump. Ditto for the third quintile, or a family earning no more than $43,000 a year.
Tariffs are inherently regressive because low-income Americans spend more of their income on household goods. Commerce Secretary Wilbur Ross has argued that no one will notice price increases whats a few cents more for a can of soup? But people in Mr. Rosss income strata are not the Trump base.
The Commerce Department is still looking at whether a muffler is a national security threat under Section 232 of the Trade Expansion Act of 1962. President Trump should abandon the idea lest Americans wonder if they really benefitted from that tax cut.
The Wall Street Journal
