Since the Republican convention and most recently in his debate with Vice President Kamala Harris, presidential candidate Donald Trump continues to promote trade tariffs, which are taxes on imported goods, as his economic cure-all for everything from inflation, to child care, to budget deficits, to forcing other nations to use the dollar for transactions.
He brags that he will force foreign exporters like China to pay these taxes to the United States.
There is just one problem with Trump’s tariff rhetoric: Everything the former president says about tariffs is false on both the process and substance of tariffs, so it’s time to set the record straight.
Trump’s views on tariffs came up early in his debate with Harris. His statements were correctly challenged by Harris and ABC debate moderator David Muir, but both had insufficient time to explain why they’re dangerous for our economy.
Simply put, Trump’s tariffs would lead to higher costs for consumers who buy any imported goods, thereby triggering inflation. Further, these misguided tariffs would ignite a global trade war when foreign nations would retaliate in kind with their own tariffs.
By his consistent failure to even mention the prospect of retaliation, Trump is omitting important possible consequences to his followers and the voters.
As a former deputy assistant secretary at the U.S. Treasury Department during the administrations of Presidents Ronald Reagan and George H. W. Bush, let me explain the dangers with Trump’s tariffs. No sane administration would embrace his dangerous, all-encompassing tariffs.
First, Trump repeatedly distorts what tariffs actually are. He claims that tariffs are paid by foreign countries to Uncle Sam’s treasury. Wrong.
Tariffs are in fact import taxes paid by U.S. importers to the U.S. government. They were the primary form of financing our government in the early days of our republic, but no more. Tariffs are collected by U.S. Customs Bureau agents at the border and paid by the importer. The bureau, a part of the U.S. Treasury, then turns the money over to the Treasury Department to fund the government.
If the extra cost of tariffs makes importers uncompetitive in the U.S. marketplace, they pass their costs along to every consumer who buys their products.
As such, foreign countries do not pay tariffs on the goods exported from their borders to the U.S. When Trump repeatedly mischaracterizes that they do, I believe he is lying.
Second, the substance, or the effect, of tariffs: tariffs are inflationary by definition. They artificially add a cost to goods produced abroad and sold here to consumers. Higher costs from tariffs simply mean more inflation domestically.
Trump’s Republican platform fully endorses a 20% “baseline tariff” — a tax on consumers of any imported good from any nation — in direct contradiction to the GOP’s promise to lower inflation. In addition to this proposed 20% consumer tax, Trump says he would impose at least a 60% tariff on every imported good from China, and from 100% to 200% tariffs on cars imported from Mexico.
What’s more, these are just the domestic impacts of tariffs. What happens internationally when every foreign nation reacts and retaliates against the U.S. by imposing their own tariffs on U.S. exports, or other forms of economic sanctions?
The answer is a global trade war and economic depression that would resemble the 1930s. Just Google the Smoot-Hawley Tariff Act of 1930 and its ramifications: worsening the Great Depression and indirectly leading to World War II.
