Trump's Tariff Plans

During his term in office, Donald Trump imposed tariffs primarily aimed to protect U.S. industries and reduce trade deficits, particularly from China and other major trading partners.

He also renegotiated a Trade Agreement with Mexico purportedly to create more fairness for the U.S.

Has it Worked ?

Here is a summary of Trade Balance Deficits with Five Major Trading Partners:

Year	China Deficit	Mexico Deficit	Canada Deficit	EU Deficit	Japan Deficit
2023	-279	-152	-68	-208	-71
2022	-382	-131	-84	-226	-76
2021	-425	-126	-89	-231	-59
2020	-310	-61	-124	-129	-19
2019	-346	-111	-109	-129	-27
2018	-419	-103	-122	-166	-28
2017	-376	-71	-126	-175	-24
2016	-347	-66	-120	-148	-25
2015	-367	-60	-114	-152	-14
2014	-344	-54	-33	-34	-3

The Trade Deficit with China peaked at $ 419 Billion in 2018 when Trump imposed tariffs up to 25 % on $ 350 Billion in Chinese goods. 

In December 2021, the Biden administration reinstated some tariff exclusions that had expired.

By 2023, the China Trade Deficit had fallen by 33 %.  

From 2018 through 2023, the Trade Deficit with the EU increased by 25%.  No significant changes in tariffs were imposed during that period.

For Perspective:

The Total Trade Deficit with China in 2018 was larger than the entire GDP of the State of Wisconsin.

The Total Trade Deficit with the EU in 2023 was larger than the entire GDP of the State of Kansas.

The Trade Balance and Tariffs have a significant impact on the U.S. economy.

Now Trump is feeling bold and, if elected, plans to double down on China and add 10% tariffs for most other trading partners.

Is this a good policy?  It is not a trivial issue.

Potential Impacts of Added Tariffs:

Trump touts that the tariffs bring money to the U.S.

Here is the Reality of what happens – the tariff collections do not come out of the pocket of the targeted countries. 

They are generally paid by Importers on the U.S. side of the border.

Importers have no margin to absorb that cost – they are passed on to Consumers in the form of higher prices.

Sure, the U.S. government will collect another $ 30 Billion in Revenue.  However, this is like a hidden tax on all Citizens.

A Protectionist Policy on tariffs risks retaliation with the targeted countries imposing tariffs of their own on the U.S., and will strain economic and political relationships.  Certainly, it disrupts the free flow of international commerce. 

History says it is bad policy except in special circumstances. 

Another major move by Trump may spark responses that will consume his ability to manage the economy, if elected.  Will he be able to bluster his way through that ?

David Hollaender                                   September 15, 2024

Cogport.com