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By Peter Aitken
Politics Weekend Editor
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Economists continue to criticize President-elect Donald Trump's plan to heavily utilize tariffs, even in light of President Joe Biden's recent increase on Trump's first administration China tariffs.
Trump introduced a raft of tariffs against China in 2018, touting their effective deterrence of Chinese competition, but just a year later economists started discussing how the U.S. consumers and firms "entirely paid" for them.
Tariffs add a tax on an imported good: A "unit" or specific tariff is a tax added as a fixed charge for each unit of a good imported, and an "ad valorem" tariff that adds a proportion of the value of imported goods, Rochester Institute of Technology Economics Professor Amitrajeet A. Batabyal wrote in an op-ed for Newsweek.
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Trump heavily utilized tariffs in his "trade war" with China during his first administration and has threatened to renew that effort and expand it with a possible 10 percent tariff on all imports – or higher, with Chinese goods hit with as much as 60 percent duties.
The tariffs would apply as part of Section 301 of the U.S. Trade Act of 1974, which empowers America to investigate and respond to foreign trade practices deemed unfair or damaging to U.S. interest.
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Democrats and economists alike have demonized Trump's plan, repeatedly criticizing him even during his first administration for his use of tariffs, a "terribly inefficient way of raising revenue," according to James Hines, professor economics and law at the University of Michigan.
Despite those concerns, the Biden administration has maintained $300 billion-worth of Trump's China tariffs and even increased some. The administration in September announced it would add tariffs ranging from 7.5 to 100 percent to Chinese products such as solar cells, semiconductors, medical supplies, electric vehicles and lithium-ion batteries.
Hines warned though that "just because both sides want to do something doesn't make it good."
"The classic argument is that tariffs are a terribly inefficient way of raising revenue because they distort gross international trade. And that argument is still correct," Hines told Newsweek during a phone interview.
"There are different ways of thinking about what that argument is saying, but, you know, one is any objective that you think you're pursuing with a tariff you can always pursue better with some other method," Hines said. He suggested that threatening to use tariffs against China should be used to pursue another goal, such as having China remove tariffs against the U.S.
"Of course, they have a keen interest in protecting employment and economic activity in the United States, absolutely, 100 percent, but, again, the classic economic argument is you do the best job of protecting jobs in the United States by not having tariffs. And when you put tariffs on it actually hurts jobs," Hines said.
"There's often a very strong political desire to have the tariffs, because the industries that you're going to help ... they don't want to have to compete on equal terms," Hines continued. "They will always try to point to other aspects of the competition that are not fair. That is, you know, maybe the other government subsidizes the industries or things like that, or our regulations discourage the industry, and you get these arguments."
Doug Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office during the second Bush administration, agreed on the ineffectiveness of the tariffs to get rival industrial powers to the negotiating table.
"Look, this is unfair trade practice," Holtz-Eakin told Newsweek during a phone interview, noting that Trump implemented three different tranches of tariffs with "the goal ... to get China to the table and get them to negotiate."
"The idea was that China would stop running such a big surplus with the United States and buy more U.S. agricultural exports, for example," Hotlz-Eakin said. "When the Biden administration came in, they kept the China tariffs, even though they did a review and found that they were entirely unsuccessful in their objective, which was to get China to change its behavior."
He added: "The new thing in the Trump campaign platform is the notion of an across the board, universal 10 to 15 percent tariff, and I think this is the one where the economics profession is most unified in saying, This is not a good idea."
"The 10 percent tariff is comparable in magnitude to the famous Smoot-Hawley tariffs during the Great Depression," he continued. "There are all sorts of reasons to be concerned about something that's a $3 trillion tax on the economy over 10 years, and the kind of International Affairs repercussions it'll have, the kind of retaliation it will have."
Elaine Dezenski, senior director and head of the Center on Economic and Financial Power at the Foundation for Defense of Democracies (FDD), argued that Trump would likely return to his targeted use rather than a baseline universal tariff that would hit trading partners and allies that the U.S. trusts.
"We want to go after China in a more specific way because we don't want Chinese EVs coming into the U.S., and we don't want their batteries going into our EVs, and we're going to need more carveouts to do that, and maybe look closely at the USMCA to make sure that you know that the appropriate safeguards are there," Dezenski told Newsweek.
She argues that we have "anything but a free trade environment in the world, and we have to push back against Chinese state subsidies and the overproduction because we, and some other consumer markets, are basically picking up all of this extra production."
"That's making it difficult for us to create our own industries to get out of this cycle, and meanwhile, you know, China is avoiding its own domestic reforms because it's just trying to produce its way out of its own failed economic cycle," Dezenski said. "So, this dynamic has to shift."
Updated, 11/10/24 at 12:45 p.m. ET: This article was updated for clarity based on Elaine Dezenski's quotes.
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