Just days after throwing international markets into a panic, President Donald Trump has reportedly halted steep import taxes on goods from Canada and Mexico after speaking with the leaders of both countries.
Over the weekend, Trump announced 25% tariffs on our neighboring countries as well as a 10% tariff on goods from China.
“THIS WILL BE THE GOLDEN AGE OF AMERICA! WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!),” the president of the United States declared in touting the new tax increases.
The president has relied on two distinct sets of arguments and justifications for tariffs.
First is his confused belief that America will be better off with less trade and a return to greater reliance on American-made goods. What Trump has long failed to appreciate is how markets actually work and that trade-offs exist.
Tariffs necessarily drive up the cost of imported goods. This leaves everyday consumers who want to purchase imported goods stuck with a higher bill. But tariffs also impose costs on American businesses that rely on imports as components of other things they make.
For instance, the American beverage industry had to take on billions of dollars in higher costs due to Trump’s tax on imported aluminum for example. And that’s just one example.
When the pros and cons, winners and losers of Trump’s first-term tariffs are taken into consideration, the record is clear. The overall American economy lost more jobs than it gained as American households and businesses were forced to spend more for the same things they got before.
Scaling up those tariffs over even more goods would be an even bigger negative for American workers, businesses and consumers alike. So, no, tariffs won’t contribute to a “Golden Age of America,” just a more expensive and less dynamic one.
In addition to this, though, is the frivolity of Trump’s second justification for the tariffs: national security.
Trump’s first-term tariffs were based on arguments that steel and aluminum tariffs were justified because of “national security.” If one seriously tried to find actual support for this assertion, they would be unsuccessful.
Yet he trotted out this same sort of argument in his official justification for imposing tariffs on goods from Canada, China and Mexico. He asserted, for example, that the reason he was imposing a 25% tariff on Canada was because Canada wasn’t doing enough to stop the flow of drugs, gang members and traffickers into America means that “this failure to act on the part of Canada constitutes an unusual and extraordinary threat.”
Does anyone buy this?
They shouldn’t.
Luckily there are some Republicans left with principles and common sense. Sen. Rand Paul of Kentucky, for example, pointed out that, “Tariffs are simply taxes. Conservatives once united against new taxes. Taxing trade will mean less trade and higher prices.”
That’s right. We can only hope that Trump snaps out of his false belief that higher taxes are the way to lower prices and a stronger America.
If he continues down this path of tariffs and protectionism, he will do great damage to American supply chains, American workers and American businesses.