10
Loading video...
By James Bickerton
News Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Prominent economists have warned Donald Trump's plan to impose a flat 10 percent to 20 percent tariff on countries he says "have been ripping us off" would cause prices to rise for American consumers and hurt U.S. businesses while likely triggering retaliatory tariffs.
Trump has long argued foreign countries have been unfairly taking advantage of the U.S. on trade. Speaking at a rally in North Carolina on Wednesday he said: "We are going to have 10 percent to 20 percent tariffs on foreign countries that have been ripping us off for years, we are gonna charge them 10 percent to 20 percent to come in and take advantage of our country because that is what they have been doing."
During his first term in office Trump imposed a range of tariffs on foreign powers during his time in the White House. In 2018, he put tariffs of 25 percent on steel and 10 percent on aluminum for almost all countries excluding Canada and Mexico. That year Trump also announced tariffs of 20 percent and 50 percent on imported residential washing machines and an initial 30 percent on solar panel components.
Read More on U.S.
Speaking to Newsweek Professor Barbara Spencer, who used to teach strategy and business at the University of British Columbia, claimed Trump's proposal for 10 percent to 20 percent tariffs on certain countries would hit U.S. firms and consumers.
She said: "Even if this tariff policy will be applied only to countries that Trump views as political foes, it is remarkable that a person as educated as Trump would see all imports from those countries as ripping off the US. A significant proportion of imports into the US are intermediate goods that reduce the costs of US firms allowing them to make profits in competition with foreign rivals both at home and abroad.
"A tariff, would raise the costs and prices of these firms, hurting both the firms and US consumers. Firms in the US that compete directly with imports can enjoy increased profits from an import tariff, but this would typically involve the firm raising its prices at the expense of US consumers."
Spencer warned that countries hit by Trump's new tariffs would be "highly likely to retaliate with tariffs or other trade restrictions" of their own in a move that would "directly reduce U.S. experts and profits."
...
The professor continued by say that with the low unemployment rate, which stood at 4.3 percent in July 2024 according to Bureau of Labor Statistics, tariffs would only have a marginal impact on employment and would likely cause inflation to rise.
She commented: "The bottom line here is that a 10 person to 20 person across the board tariff will not achieve any reasonable economic objective. Those countries targeted with a tariff will suffer a reduction in exports, but U.S. consumers and firms importing intermediate products will also suffer due to the increase in the cost of imports which could be substantial.
"If the idea is to expand domestic production of goods so as to benefit U.S. workers, not much expansion can be achieved in an economy such as the U.S. that is close to full employment. Any attempt at a major domestic expansion will instead increase inflationary pressures. Also, an objective to enhance U.S. exports is likely to fail. By raising U.S. costs, the tariffs will generally make U.S. exports less competitive."
Spencer did concede that Trump's tariff plan could "raise tax revenue substantially" though she argued this could be done more fairly via other taxes, such as income tax, to "avoid a heavy tax burden on low income people."
Matilde Bombardini, an associate professor of business and public policy at the University of California, Berkeley, also warned Trump's 10 percent to 20 percent tariffs would raise prices for American consumers and companies.
Addressing Newsweek, she said: "We have a good sense about the economic impact of these potential tariffs, based on the effects of the (still-in-place) tariffs that were levied on imports from China during the Trump administration. Several pieces of academic research have shown that these tariffs have been primarily been paid by U.S. consumers and firms importing intermediate inputs, with small effects on U.S. employment.
"What we have seen is that tariffs on China have led to several producers relocating to Vietnam and Thailand. So, we can expect that further tariffs would impact prices paid by consumers and firms, with unclear benefits for U.S. workers."
Abigail Cooke, an expert in trade policy at the University at Buffalo in New York, agreed Trump's tariff proposals would likely raise prices for American consumers and producers when speaking to Newsweek.
She said: "There are two things missing from the overly simplified idea that placing tariffs on other countries' products hurts those foreign producers and helps American producers. First, it raises prices for American consumers. We've just gone through a period of relatively elevated inflation rates that have made American consumers really upset. Tariffs contribute to higher prices.
"Second, American producers rely heavily on imported inputs. There are virtually no American-only-made supply chains. So tariffs also hurt many American producers. Tariffs, especially for a relatively wealthy country like the U.S., are a blunt economic tool with many of the costs also borne at home in the U.S."
Writing for Newsweek in July, Kenneth Rapoza, an industry analyst at The Coalition for a Prosperous America, which claims to represent "domestic producers and workers across many industries," said Trump's 2017-21 tariffs were a useful bargaining tool for the U.S.
He wrote: "Whiskey, Harley and OJ tariffs to Europe and the U.K. were suspended because the E.U. and U.K. agreed to steel export volume limits to the United States. Without the original tariffs as leverage, none of this would have happened. Now the U.S. steel and aluminum industry can grow (as they are) without being inundated with imports."
In May, President Biden announced the U.S. would dramatically increase tariffs on Chinese electric vehicles from 25 percent to 100 percent in response to what U.S. Trade Representative Katherine Tai termed "unfair technology transfer-related policies and practices" from Beijing.
In a statement sent to Newsweek Republican National Committee spokesperson Anna Kelly said: "President Trump put America First by instituting tariffs while simultaneously keeping inflation and consumer prices low. Kamala Harris has already made life unaffordable for American families with sky-high gas, rent, and grocery prices.
"President Trump's policies brought forward a booming economy, and he will once again lower taxes, impose tariffs on foreign producers, bring jobs back to the US, and put America First on day one."
Update 8/17/24, 3:15 a.m. ET: This story has been updated with comment from University at Buffalo academic Abigail Cooke.
Update 8/19/24, 10:15 a.m. ET: This story has been with comment from a RNC spokesperson.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines