Sequels are never as good as the original. And when the original was terrible, there’s even more reason to dread the next episode. So it is with “Tariff Man Part Two”. In the White House, Donald Trump put more new tariffs on American imports than any president in nearly a century. His philosophy was simple: “I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so.”
Tales of protectionism under Mr Trump’s tenure made America poorer, did little to help exporters, and annoyed its friends. If he wins the Republican presidential nomination (a likely outcome) and the election (too close to call), he has vowed to ramp up things further. He is mulling an across-the-board levy of perhaps 10% on all products entering America. In one fell swoop, his plans would more than triple the average American tariff. The direct costs would be bad enough, with the tariffs functioning as a tax on consumers and hurting most producers. Yet they would also tear at America’s ties with its allies and threaten to wreck the global trade system.
To get a sense of the impact, look back. By 2021 American duties were worth 3% of the country’s total import value, double the level when Mr Trump took office. Tariffs on Chinese imports rose from 3% to 19%.
Industries that were protected by tariffs reaped benefits, enjoying greater market share and fatter profits. Most others suffered. America’s International Trade Commission found that industries downstream from tariff-coddled producers faced higher input prices and lower profitability. The Peterson Institute estimated that steel users in effect paid an extra $650,000 per job created in the steel industry. Studies have calculated that almost all the costs have been borne by Americans, rather than foreign producers. The International Trade Commission found a near one-to-one increase in the price of American imports in the wake of tariffs on China.
According to a recent survey from the Chicago Council on Global Affairs, a think-tank, 66% of Americans think the government should place restrictions on imported foreign goods to protect jobs at home, up from 60% in 2018. Joe Biden, although critical of tariffs as a costly policy on the campaign trail in 2019, has rolled them back only a little, keeping the array of levies on China intact. At the same time, he has concocted an enormous industrial policy, fuelled by more than $1 trillion in subsidies for electric vehicles, offshore wind, semiconductors, and the like.
But how much worse could things get? If Mr Trump wins the presidential election in 2024, the world may discover that the answer is: “Rather a lot.” In August, Mr Trump proposed a 10% levy on all foreign firms selling to America. Countries would likely respond by slapping their own tariffs on America, making international commerce less attractive, and negating trade policies that America had built with its allies.
Despite the outlook Mr. Trump faces opposition. The Republican Party’s guidelines at Project 2025 suggest the party has more free-trade leanings than not. And Mr. Biden’s work to repair ties with America’s allies would be torn apart by Mr. Trump’s universal tariffs. Legal challenges to Mr. Trump’s protectionist policies are also likely to hinder enforcement. The consequences of a second Trump presidency for global trade would be serious and lasting.
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