TRUMP’S TARIFF TWEETS TRIGGER MORE CONCERNS
Taxes on U. S. firms could result in higher prices— or recession
In 2009, President Obama raised tariffs on car tires made in China, charging that domestic competitors were hurt by imports. Ranging from 25% to 35% for a period of three years, the tariffs saved about 1,200 jobs, according to an analysis by the Peterson Institute.
But there were consequences. Tire prices rose in the USA. And with Americans paying more for tires, spending on other retail goods fell, ultimately costing the U. S. economy about 2,531 jobs, the institute estimates.
In addition to questioning the legality and feasibility of trade policy that Donald Trump has tweeted in recent days, experts in the field and economists also warn of negative spillover from the presidentelect’s threats on Twitter to impose a 35% tariff on U. S. firms shipping jobs abroad.
The potential fallout, they say, could include legal battles, higher prices for U. S. consumers and pushing the country into a recession.
Specifically, the president- elect said Sunday that the tax would be levied on the goods of American companies closing U. S. factories to ship jobs abroad.
“Any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U. S. without retribution or consequence, is wrong,” he wrote. “There will be a tax on our soon to be strong border of 35% for these companies.”
Like Trump’s other quasi- policy tweets, the message left many experts baffled.
A unilateral move by the president to impose taxes on a specific company is unheard of, if not illegal. And tariffs could trigger consequences far beyond those envisioned at the onset.
While he’s seemingly referring to American companies, it also is unclear if the restriction he calls for refers only to those contemplating closing current domestic factories or generally discouraging manufacturing abroad. Trump made no distinction among large companies with their
own factories or those who outsource assembly to foreign partners.
“I think this is more an idle threat rather than a viable policy option,” says Paul Ashworth, chief U. S. economist at Capital Economics. “It’s just too complicated and discriminatory to implement. And why would you only punish U. S.owned businesses? Makes no sense.”
Experts question the range of legal powers of Trump in trade matters once he assumes the White House. The U. S. Customs and Border Protection administers trade policy enforcement and can apply tariffs based on country and productspecific categories, notes Robert Scott at the Economic Policy Institute.
“I have no knowledge of any existing executive authority that will allow the president to apply any company- specific tariffs,” Scott says.
Yet a U. S. president has ways to initiate trade disputes, notes Gary Hufbauer at the Peterson Institute for International Economics. “The president can impose import restrictions after a finding that national security is at risk.”