President Donald Trump promises to engage in major tariffs as part of his Make America Great Again plan. These tariffs drew lots of backlash and support from both sides of the aisle. Trump already instituted a 25% tariff on Canadian and Mexican goods and is threatening a 200% tariff on wines imported from the EU.
Trump believes these tariffs will bring jobs back to the United States and increase tax revenue for the federal government. Having a stronger homeland manufacturing industry is important for potential times of war in the future when international distribution chains may be disrupted. Additionally, the increased tax revenue paired with reduced government spending may help end or reduce the national debt.
Some are concerned surrounding the effects tariffs will have on consumers. According to an article by the BBC, EU experts denounced the tariffs as “bad for business, worse for consumers.” The issue is that many Americans are reliant on foreign goods and any expenses from tariffs would be passed on directly to the consumers. There is a real possibility for Trump’s plan to “make America great again” to in fact reduce the standard of living through rising prices.
The White House plans to enstate reciprocal tariffs, such that all tariffs put on American goods will be put on incoming goods from the offending country. According to a release from the White House, “The United States has been treated unfairly by trading partners, both friend and foe.” By instating reciprocal tariffs, President Trump is pressuring foreign markets to engage in freer trade with the United States, bringing more revenue to export-focused industries.
Some American economists fear that instigating foreign nations with reciprocal tariffs is a mistake. The natural system of negotiating tariffs between countries has been around since 1960, and President Trump’s reciprocal tariffs threaten to disrupt that system and cause inefficiencies in trade, according to an article by AP News. The fact that the U.S. has not been a major exporter since 1975 is also cited as a reason not to pursue tariffs; the U.S. simply may not have the status and presence necessary to take that role back.
The underlying reason foreign trade exists is because it is cheaper, or more efficient, to have foreign nations produce certain goods. While some domestic businesses may benefit from the new foreign policy, many others will be hurt as the cost of materials goes up, in turn making products more expensive for consumers. According to an article by the New York Times, automotive manufacturers are bracing for impact as steel and aluminum tariffs threaten to dramatically increase the cost of producing and selling cars. With car prices already at record highs, many pro-tariff Americans may quickly change their tune.
In President Trump’s address to the nation, he briefly mentioned a “period of transition” that could bring us into a recession. According to an article by Fox Business, Trump views this transition period as a rough but necessary and good thing for the U.S. According to President Trump, he is bringing wealth back to the nation. Tariffs could be a net positive for the nation despite experts believing it will be the opposite.
It’s hard to say right now whether tariffs can live up to the expectations that either side has of them. Over the next four years, economists must observe changes in the economy to determine in retrospect if tariffs work or not. In the meantime, the American economy will be relatively safe, as recession does not mean collapse and could be the worst of the storm before the calm.
