Despite legal risks, Donald Trump has reportedly summoned his top economic advisers to discuss implementing massive new import tariffs If elected in 2024. There is no reason to doubt his intentions. Trump actually did some of these things selectively during his presidency. He has imposed tariffs on imports of steel and aluminum, saying it is a matter of national security. The additional tariffs hit products of U.S. allies and competitors indiscriminately. Our allies are appalled. The EU retaliated with tariffs on U.S. exports. Unsurprisingly, the U.S. move was condemned by an international panel at the World Trade Organization (WTO). The current administration has rolled back Trump’s tariffs and kept some import caps in place. Trade peace has been restored, at least for now.
Trump also imposed 25% tariffs on a variety of products from China. China has also retaliated by imposing tariffs.this set tariff Basically leave it as it is. Both the U.S. actions and China’s response have been condemned by the WTO. By imposing tariffs on Chinese goods, the purpose is to make China buy more American goods and change the trade policy that makes the United States dissatisfied. No evidence China has done the same.
There was a time when countries competed to impose high tariffs on each other’s goods. It didn’t end well. That was nearly a century ago, so memories of those horrific policy mistakes are not that fresh.
In 1930, Congress, which has the power to commerce in the United States under the Constitution, decided to raise tariff levels to an average of around 40%. America is not the only country making such stupid moves. Other major trading nations have also raised tariff barriers. The race to raise tariffs deepened and prolonged the Great Depression, with U.S. unemployment reaching 25%. This economic war led to World War II, and Germany turned to fascism and aggression to restore economic growth.
It took most of the last century to revert to lower tariff levels. Currently, the average U.S. tariff rate is below 3%, and the U.S. unemployment rate has dropped to 3.5%. But it is all too easy to reverse that progress.
America needs allies. The Japanese and South Korean prime ministers were recently received by U.S. President Joe Biden at Camp David. They are necessary to the defense of the United States in the Pacific. Across the Atlantic, the United States is working with the European Union, Britain and other allies to counter Russian aggression in Ukraine. Imposing a general tariff on all foreign goods based on the notion that all other countries are somehow unfairly competitive would strain America’s alliances to the breaking point. Other governments also have domestic politics. They will be forced to retaliate.
We need to trade with other countries.Some 20% of U.S. agricultural products depend on export markets. Entire industries and many good jobs rely heavily on exports, including transportation equipment, chemicals, machinery, computers and electronics, petroleum and coal products, primary metals and medical equipment. Trade is more than exports. Without imports, the transition to electric vehicles would not have been possible when the pandemic hit, nor would frontline responders have access to large quantities of personal protective equipment.
The expansion of trade since World War II has underpinned enormous growth in the global economy, from which the United States has also benefited. by value, trade increased It has grown nearly 400 times since 1950. In 2022, a record $32 trillion worth of trade will flow through the arteries of the global economy.
To be sure, foreign practices still adversely affect American workers and the companies they work for. Since Franklin Roosevelt, the solution has been to negotiate foreign barriers and trade-distorting trade agreements. In fact, that’s exactly what the Trump administration is doing when it comes to trade with our near neighbor — it negotiated an agreement with overwhelming bipartisan support to preserve NAFTA, updating dozens of The year-old North American Free Trade Agreement (NAFTA) came out of Congress.
What Trump won’t tell you is that a tariff is a tax. Someone has to pay the price, whether it’s an American company that needs parts or chemicals, or a consumer that needs a foreign product. If the answer is that there will be exceptions, that would add a whole new layer of government, at the taxpayer’s expense. Even in 1773, the good citizens of Boston understood that it was not the English who bore the tea tax.
The US announcement of a new tariff wall sounds like a force, but it would be a retreat from the world and would only demonstrate a lack of confidence in US competitiveness.
Alan Wm. Wolf is a Distinguished Visiting Scholar at the Peterson Institute for International Economics and author of Revitalize the world trading system.
The opinions expressed in Fortune review articles are solely those of the authors and do not necessarily reflect the views and beliefs of: wealth.
Svlook
