America First is expensive
Chances are pretty good that you haven’t felt the sting of President Trump’s punitive tariff policies. But you will.
The president announced Monday that China had (unsurprisingly) refused to buckle in the face of his decision to slap tariffs on $50 billion worth of goods imported into the United States. Instead, China had retaliated with tariffs on $50 billion worth of U.S. exports, “threatening United States companies, workers, and farmers who have done nothing wrong,” the administration said in a statement.
Therefore, Trump said, the administration will identify $200 billion worth of Chinese goods to be hit with an additional 10 percent tariff. “If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods,” Trump declared, adding, “The trade relationship between the United States and China must be much more equitable.”
Well, yes, but Trump’s path from here to there is going to get costly — not for China, which has a fast-growing economy, a robust savings rate, a proven ability to navigate its way around trade barriers and an entire world of other trading partners. Instead, the burden will fall on U.S. businesses and consumers that buy low-cost Chinese goods.
The Wall Street Journal reported Tuesday that the first big Trump tariff — on imported washing machines — had caused a 17 percent increase in the price of washers in the United States. Most consumers didn’t feel the sting of that increase because they already had a washer; in fact, the Washington Post estimated that the tariffs announced before Monday reached barely 4 percent of the goods imported into the U.S.
The moves announced Monday, however, would roughly triple the amount of goods affected. And if Trump followed through on the full threat and slapped tariffs on $400 billion worth of Chinese goods, that theoretically would reach 20 percent of imports.
Remember, tariffs cost consumers and businesses that switch to U.S.-made goods too, by pushing them away from cheaper imported products. That’s the point; the intended payoff is to shift jobs back to U.S.based manufacturers. But the evidence from previous trade wars is that tariffs wind up eliminating more jobs in other industries than they create in the one the administration is trying to protect.
Economist Mark Zandi told the Journal that the U.S. economy would still grow in spite of the tariffs, just not as fast. So the president isn’t exactly pushing the U.S. back into recession. Still, you have to wonder when Trump’s supporters and the Republicans who represent them in Congress will start to squawk that it’s costing them too much to put America First.