Donald Trump’s Tariff Fantasies
Image by Darren Halstead.
Tariff Man
Donald Trump thinks the world of tariffs. “Tariffs are the greatest thing ever invented,” Trump said in September at a town hall event in Michigan. On another occasion he said “tariff” is the most beautiful word in the English language. Hmm. And he really has had a love affair with tariffs. After all, they mark his entry into national politics. Back in the mid-1980s, his one big gripe was the trade deficit with Japan. Then China became the target, and while president, Trump kept raising tariffs with China in the belief China would bend a knee and surrender. It didn’t, and Biden has been stuck in a tariff war ever since.
Vice President Kamala Harris referred to her opponent’s tariff policy as a “Trump Tax.” She’s right: Several independent studies have found that the new tariffs, if implemented, would raise costs for the average middle-class family anywhere between $1,350 and $3,900 a year. The reason is simple: tariffs are usually passed on to the consumer by the importing company—unless, of course, the company wants to eat the tariff cost. Yet Trump and Vance, either out of pure ignorance or for political gain (or both), insisted that the exporting country pays. Referring to Harris’ claim, Trump said: “She is a liar. She makes up crap … I am going to put tariffs on other countries coming into our country, and that has nothing to do with taxes to us. That is a tax on another country.” In September, he repeated the claim during an interview with Fox News: “It’s not a tax on the middle class. It’s a tax on another country.”
Vance chimed in that when Trump was president and raised tariffs on Chinese goods, “prices went down for American citizens. They went up for the Chinese but they went down for our people.” Totally wrong. In fact, the American Chamber of Commerce in Beijing opposed Trump’s tariffs precisely because US importers would have to pass along higher prices to consumers, making their goods less competitive. But Trump wasn’t listening.
Promises and Realities
The longer the presidential campaign went on, the more promises Trump made about the wonders of high tariffs cuts. He proposed extending the 2017 tax cuts and eliminating taxes on tips, overtime pay, and Social Security benefits. All that may sound great, but they all mean lost revenue that will have to be made up somehow. He has also said the tariff revenue could pay for a child care initiative. And CNBC reported that he was floating the idea of replacing the federal income tax with tariff revenue. Millions of people may no longer have to pay an income tax, he said. Fantasies.
As CNN reports, “Trump has said that if elected, he would impose tariffs of up to 20 percent on every foreign import coming into the US, as well as another tariff upward of 60 percent on all Chinese imports. He also said he would impose a “100 percent tariff on countries that shift away from using the US dollar.” Hence, the Trump tax and the higher living costs for the average family. According to the US Customs and Border Protection, “Americans have so far paid more than $242 billion to the US Treasury for tariffs that Trump imposed on imported solar panels, steel and aluminum, and Chinese-made goods.” And that’s with tariffs Trump raised on only 14 percent of imports, not the 20-100 percent he (along with Project 2025) is now promising.
No responsible economist believes that such ideas make sense. Not only will tariff revenue fail by a long shot to cover a falloff in tax revenue or pay for all his other social plans. According to an estimate by the Committee for a Responsible Federal Budget, Trump’s proposals would add $7.5 trillion to the national debt over the next decade. Harris’ proposals, by comparison, would add an estimated $3.5 trillion. Twenty-three Nobel Prize-winning economists endorsed Kamala Harris’ economic program, but to no avail.
Weaponizing Tariffs
Trump’s tariffs also have an important strategic dimension. In a word, it’s all about China. Once Trump removes the US from Israel’s war on Hamas and Putin’s war on Ukraine, he becomes free to focus on China, which nearly everyone in official Washington considers America’s number-one national security threat. High tariffs on Chinese imports will complicate their already serious economic situation, since China depends heavily on exports. Close off the US market, as Project 2025 proposes, and Xi Jinping is not only in political trouble at home but must also ponder what an invasion of Taiwan would mean. Or so Trump believes. He has made a head-spinning prediction that China will never invade Taiwan because of the 150-200 percent tariffs he would impose—as well as his belief that Xi Jinping “respects me and he knows I’m f***ing crazy.”
Trump is indeed crazy if he thinks the Chinese are going to kowtow to him because the US is decoupling from China.
In the first place, China is already shifting export markets from the US to the Global South—developing countries, most of which have signed onto China’s Belt and Road loan initiative.
Second, the Chinese government is finally recognizing the limitations of an export-driven economy and has introduced the first of perhaps several financial stimuli designed to meet consumer demands.
Third, China’s policy on Taiwan has nothing to do with US tariffs and everything to do with whether or not the US supports Taiwan’s independence. If Trump decides to cross China’s red line and, in support of the China hawks in Congress, keep upgrading Taiwan’s military and political status, Xi may decide to abandon China’s longstanding policy of peaceful reunification.
Fourth, Trump’s decoupling from China—which will expand upon the Biden policy of restricting advanced technology exports to and investment in China—is moving China further in the direction of self-reliance.
As always, nationalism is a powerful force in Chinese politics. Their leaders have made very clear that they are not going to let the US get away with interfering in China’s development. And if they perceive that what Trump’s tariffs are really all about is promoting regime change in China, we’re in for a very Cold War.
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