Leading up to the 2020 election, polls consistently showed that American voters trusted Donald Trump more on economic issues than Joe Biden. But while President Biden’s handling of the economy justifiably has a low approval rating, Donald Trump just gave voters reason to believe that if wins the GOP primary and then beats Biden in 2024, his economic policy could be even worse.
Trump recently announced that if elected to a second term, he would impose a staggering 10% tax on all imports. This won’t play well with the business community, economically conservative independents, and Republicans who are all well aware of the adverse economic impact of tariffs, undermining Trump’s advantage in a critical area.
Punitive taxes on products made abroad restrict the freedom of businesses and consumers alike, as well as increase domestic prices, reduce productivity, slow economic growth, and lead to a net loss in jobs. Ultimately, it’s U.S. consumers and businesses that depend on imports who would suffer most from Trump’s scheme.
According to an analysis by the Tax Foundation, a blanket 10% tariff on all imports would cost consumers $300 billion per year, lead to the elimination of 550,000 jobs, and reduce economic growth by 0.7%. The analysis adds that if countries around the world respond with retaliatory tariffs, U.S. GDP would decrease by an additional 0.4%, and 322,000 more jobs would be lost.
Even the Biden White House has spoken out against Trump’s plan, stating “President Biden strongly opposes plans to hurt hardworking families with higher prices and higher inflation...” That’s rich coming from an administration that chose not to repeal the tariffs Trump put in place during his first term, has undertaken an uncontrolled spending spree, fields a Federal Trade Commission that is incredibly hostile to business, and more. But while the Biden Administration’s handling of the economy has been objectively poor, it is right about Trump’s tariff plan.
Furthermore, given the consequences of the tariffs established during his first term, Trump has no excuse to believe his brazen 10% tariff policy would bring anything but harm to the average American. According to another analysis by the Tax Foundation, those tariffs led to a loss of 166,000 jobs and negated over 10% of the economic value that the 2017 Tax Cuts and Jobs Act presented. Additionally, despite Trump’s dubious promises to the contrary, the tariffs predictably failed to revitalize U.S. manufacturing.
Nevertheless, in a letter to the Wall Street Journal Editorial Board, Trump defended his new tariff plan, decrying the current level of imports and the U.S. trade deficit and claiming that “our country is being plundered.”
But there is nothing plunderous about foreigners selling goods and services to Americans. As Milton Friedman said in the 1970s, “the goods and services we import, they provide us with TV sets we can watch, with automobiles we can drive, with all sorts of nice things for us to use.” In other words, imports expand the market for U.S. consumers who get to enjoy more goods and services without devoting capital or time towards their production. This frees up capital for investment in other areas that can help further grow the economy.
Trump’s 10% tariff plan would cause American businesses, workers, and consumers great harm. Although he has historically held more voters’ trust on the economy than Biden, Trump is jeopardizing that advantage by pushing a damaging policy that signals he may be even worse for the country’s economic prospects.