If at first you fail, try to fail some more.
This could be Donald Trump’s mantra as he begins to brainstorm some economic policies to run on while managing 4 criminal indictments involving 91 charges and trying to capture the 2024 Republican presidential nomination.
Trump will reportedly roll out a plan to impose a new 10% tariff on all imports, as a way to raise revenue for other taxes he wants to cut. Those include the standard corporate tax rate, which Trump wants to lower from 21% to 15%, and an extension of individual tax cuts passed in 2017 that are due to expire in 2025.
Trump dubbed himself Tariff Man while imposing new duties on steel and aluminum imports in 2018. He followed that with new tariffs on hundreds of billions of dollars of Chinese imports that raised costs for American businesses and consumers.
Trump seethed at the large US trade deficits with China and other countries, and his tariffs were supposed to reduce the amount of US imports and improve trade deficits. Trump also negotiated deals in which China was supposed to buy more US exports, lowering the trade deficit further.
By those measures, and many others, Trump’s trade strategy failed, as myriad economists predicted.
The US trade deficit in goods with China is now slightly larger than when Trump took office in 2017—and that’s with substantial re-shoring that began after the Covid pandemic revealed an over-dependence on China for many key products and components. The overall trade deficit in goods is 48% higher than when Trump took office. That’s important because some imports simply shifted from China to other countries, such as Vietnam and India, that were not subject to Trump’s China tariffs.
Another stated goal of Trump’s protectionism was to boost US manufacturing employment. That flopped, too.
There was steady growth in factory jobs until 2019, the first full year Trump’s tariffs were in place. Then manufacturing employment flatlined, and that was well before the Covid recession hit in 2020.
There’s been a boom in manufacturing jobs under President Biden, and forecasters expect that to accelerate as a burst of factory construction brings new plants online. But that’s due to major bills Biden has signed to build and repair infrastructure, subsidize semiconductor manufacturing and incentivize the green-energy transition, not to anything Trump did.
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Trump’s trade war did worse than nothing: It set back growth and employment.
The conservative Wall Street Journal editorial page recently declared that “Trump’s trade war was a loser,” pointing out that businesses hurt by paying more for components vastly outnumbered those helped by Trump’s protection racket. A 2021 study found that Trump’s protectionism killed 245,000 American jobs, mainly because it raised production costs. There is virtually no defense for a Trump policy that absurdly raised taxes on Americans in order to punish foreigners.
So why make the same mistake again?
Trump is famous for fixating on fact-free pet ideas, so he may simply have a crusader’s faith in tariffs because somebody once told him they were a great idea and he has believed it ever since. He may also think American voters are dumb enough to cheer his populist rhetoric without bothering to check whether Trump’s actual policies would harm or help them.
Trump, or any Republican who wants to cut taxes, will also need to find new sources of revenue to satisfy Senate filibuster rules for passing any law that affects the budget. And Trump’s tariffs would provide substantial headroom for tax cuts elsewhere. The Committee for a Responsible Budget estimates that the new Trump tariffs would generate $250 billion in revenue per year, which is a lot, even by Washington’s bloated standards. The Tax Foundation estimates it would raise even more— $300 billion per year.
A couple of tests will indicate whether the Trump uber-tariff is viable policy or a lead trial balloon. Since it would be a large tax hike, plain and simple, Trump’s opponents can plausibly claim that he wants to raise taxes on all Americans. Watch how the Republican candidates hoping to bump Trump out of the election respond to this. Mini Trumps such as Vivek Ramaswamay may copy the tariff idea, but the smarter move would be to blast Trump for re-running a failed strategy and try to steer the GOP back toward some semblance of rational economic policy.
If Trump does become the Republican presidential nominee, his tariff fetish could be a gift to Biden, who could certainly use a boost. Biden left the Trump China tariffs in place mainly because repealing them would have opened him to charges of being “soft on China.” But Biden has pursued a very different and arguably better trade policy than Trump, by working with allies to isolate China and signing laws that bolster domestic production without punishing Americans who buy imports.
Democrats don’t usually get a chance to say, Republicans will raise your taxes. Trump is giving his opponents that.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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