American voters appear to be buying Donald Trump’s promise that sharply higher tariffs on imported goods will make them better off.
If he gets the chance to put his plan into practice, they’ll be in for a shock.
The 2024 presidential election could be among the most consequential ever for U.S. trade policy. The two candidates’ policies are radically different, and the winner will enjoy considerable authority to act unilaterally.
Trump calls himself “Mr. Tariff” and invokes the presidency of William McKinley in the late 1890s, when high tariffs generated significant income for the government. He argues that increased import duties will reinvigorate U.S. manufacturing, investment, employment and economic growth. He has pledged to impose levies as high as 20% on all imports and 60% on Chinese imports.
Kamala Harris, by contrast, would change little. She has argued that higher tariffs would act like a national sales tax, boosting prices for imported and domestic goods alike. Most likely, she would use tariff policy selectively, to protect industries important to national security or threatened by foreign countries’ unfair trade practices.
Like nearly all economists, I’m on Harris’s side. In one recent poll, 95% of economists agreed that “imposing tariffs results in a substantial portion of the tariffs being borne by consumers of the country that enacts the tariffs, through price increases.”
Tariffs distort production by shielding less-productive industries from competition, pushing activity away from a country’s comparative advantages. They also tend to trigger foreign retaliation, which worsens the economic impact by making a country’s products less competitive abroad.
Many voters, however, appear to believe Trump. In a September poll by Reuters/Ipsos, 56% of registered voters said they were more likely to support a candidate who backed a 10% across-the-board tariff and a 60% tariff on China.
Why the disconnect? Voters generally view economic performance during Trump’s first term favorably. Until the pandemic hit in March 2020, growth was solid. The tariffs he imposed were relatively small: just 3% of aggregate imports, generating customs duties amounting to only 0.4% of gross domestic product as of the end of 2019. The effect on the broader economy was hardly noticeable, overwhelmed by developments such as the large corporate and personal income tax cuts of 2017. Because inflation had been running below the Federal Reserve’s 2% target for most of the decade, the minor impact on inflation was not problematic.
This time around, if Trump wins the election and enacts his tariffs, the consequences will be much greater. The Tax Foundation estimates that the average tariff rate could increase by 700% by the end of 2025. U.S. producers simply wouldn’t be able to find the resources to expand their on-shore production and replace imported goods. Any job creation would come at exorbitant cost: By one estimate, Trump’s steel tariffs increased costs by $5.6 billion and created about 8,700 jobs. That’s about $650,000 per job each year.
Across-the-board higher tariffs would both raise inflation and hurt growth. As the cost of imported inputs surged, U.S. producers would have to scramble to find replacements, stressing supply chains and further undermining productivity. Foreign retaliation would be inevitable.
Maybe Trump is a true believer in the wisdom of raising tariffs. In any case, voters need to recognize that he doesn’t know what he’s talking about.
