Donald Trump won the presidency, in large part, by promising working class voters that he would create lots of new jobs by imposing tariff taxes on imported goods.
One of the big problems with the US economy, he told voters, is that we’ve been sending jobs overseas through bad trade agreements that flood our stores with low priced imports. That may be good for consumers, but not for US labor struggling to earn a living wage. The simplistic answer, Mr. Trump told us, is to impose trade taxes, known as tariffs, on those imports, making them far more costly and thus create a level playing field that would strengthen our economy and make us more competitive. It wasn’t a new idea, but one that has been promoted by organized labor and politically powerful union bosses and their liberal allies in the Democratic Party throughout our industrial history. But it isn’t all it’s cracked up to be and is contrary to all of the available evidence that shows trade tariffs hurt low income consumers, businesses and our overall economy.
More than a year ago, when the billionaire mogul was preparing to enter the GOP presidential race, economists Stephen Moore and Larry Kudlow wrote a brilliant piece for Investors Business Daily that warned of the dangers in Mr. Trump’s plan.
“Here’s a historical fact that Donald Trump, and many voters attracted to him, may not know: The last American president who was a trade protectionist was Republican Herbert Hoover,” they wrote. “Obviously that economic strategy didn’t turn out so well – either for the nation or the GOP,” they wrote, then posed this question: “Does Trump aspire to be a 21st century Hoover with a modernized platform of the 1930 Smoot-Hawley tariffs that helped send the US and world economy into a decade-long depression and a collapse of the banking system?”
Yes, Mr. Trump is right when he complains about the unfair trading practices by China and other economies around the world – pirating our technologies and patents, and counterfeiting our goods, say Mr. Moore and Mr. Kudlow.
“But clapping Trump’s punitive tariff on imported Chinese goods will hurt Americans at least as much as it does Beijing,” they said.
Many voters may have forgotten that Trump’s proposed 35 percent tariff on imported goods is nothing more than a tax added to the cost of the products they buy.
Not only would it be “the biggest tax increase on US consumers in modern times,” the two noted conservative economists said, it would hurt the most vulnerable people in our economy.
“Wal-Mart has been one of the greatest anti-poverty programs in world history, and it has achieved the ‘everyday low prices’ that greatly benefit the poor and middle class in part through low-cost imports,” they point out.
Prices at these and other discount chain stores would rise sharply under Mr. Trump’s tariffs, hurting retail businesses across the country, resulting in store closings, widespread layoffs and a weaker economy.
“Economists are famous for disagreeing with one another,” writes Harvard’s conservative economist Greg Mankiw, but there is surprisingly uniform agreement on the harm tariffs can inflict on our economy. Last year, “a panel of 51 leading economists of differing ideological views were asked to respond to this statement: “Adding new or higher import duties on products such as air conditioners, cars and cookies to encourage producers to make them in the US would be a good idea.”