“During former President Donald Trump’s term in office, he promised that higher tariffs on American imports would reduce the country’s large trade deficit.
At the time, many economists disputed that notion. Tariffs might marginally reduce the import side of the trade ledger, but they also reduce economic output (and therefore exports), so the net effect on the trade deficit was likely to be minuscule, they warned.
No matter. In 2017, the White House’s official Trade Policy Agenda highlighted how America’s manufacturing trade deficit had grown from $317 billion in 2000 to $648 billion in 2016. That was evidence, the document claimed, that greater levels of trade had triggered “a period of slowed GDP growth, weak employment growth, and sharp net loss of manufacturing employment in the United States.”
You know what happened next. Tariffs were raised. Then more tariffs were added. President Joe Biden took over and left Trump’s higher tariffs in place. American businesses and consumers paid the cost of those higher taxes. The average tariff rate on imports to the United States has climbed from 1.5 percent to over 3 percent, and annual tariff revenue has nearly tripled.
So what happened to the trade deficit? It didn’t fall.
In 2017, the last full year before Trump’s tariffs were imposed, America’s overall trade deficit was $517 billion. By 2023, it had grown to $785 billion, according to new Census Bureau data.
The story is the same when you look at the manufacturing trade deficit, the narrower category that the Trump administration had highlighted in that 2017 report. It climbed to over $1 trillion by 2021, nearly 60 percent higher than the 2016 figure that was cited by the White House as evidence that free trade was a failure.
Rather than reducing the manufacturing trade deficit, the higher tariffs likely led to its sharp increase, writes Ed Gresser, a former assistant U.S. Trade Representative. “Manufacturers import goods so as to turn them into other goods, and are big tariff payers,” writes Gresser in a post for the Progressive Policy Institute, where he now works as vice president for trade policy. “So the tariffs raised the costs of industries like automobiles, machinery, and toolmaking; they faced a bit more challenges competing against imports and succeeding as exporters; and the overall goods/services deficit grew more concentrated in manufacturing.””
“”I don’t think we’re going to see a deal like we saw in the first term,” Robert O’Brien, Trump’s fourth and final national security advisor, told Chalfant. “I think people were generally happy with [the previous deal], but as it turned out, the Chinese didn’t honor it.””
“The really frustrating thing about this is that Trump is fundamentally wrong about how tariffs work. He has been for a long time. Taxes on Americans are not going to change China’s behavior. That’s not theoretical. We have six years of real evidence. Tariffs are not saving American manufacturing. The trade deficit didn’t fall like Trump promised it would. China didn’t buy the larger share of American imports that were part of Trump’s supposed “phase one” deal. In the middle of Thursday’s debate, Trump even managed to confuse the trade deficit with the federal budget deficit (a mistake he’s been making for years).
If only Biden were in a position to highlight Trump’s clearly misguided views on trade and tariffs. But that would have required different choices over the past three-plus years (and a stronger debate performance from the president, who struggled at times on Thursday to be articulate).
Biden chose this outcome, and now we’re left with a choice between a candidate who doesn’t understand the fundamentals of trade policy and one who has foolishly gone along with that fantasy for political gain.”
“In a recent paper titled “Industrial Headwinds: Reducing the Burden of Regulations on U.S. Manufacturers,” published in the May 2024 Club for Growth Policy Handbook, economist Daniel Ikenson writes, “For manufacturing firms, the cost of federal regulations in 2022 was roughly $350 billion, or 13.5% of the sector’s GDP—a burden 26% greater than the inflation-adjusted cost of regulatory compliance in 2012.”
He adds that while the average U.S. company pays a regulatory compliance price of $13,000 per employee, large manufacturers shoulder a cost more than twice as much—$29,100. However, even some small-sized manufacturers face annual compliance costs of $50,100 per employee. This helps explain why manufacturing automation is so popular and why our fastest-growing companies are in service-sector tech, not manufacturing.”
“A set of new tariffs proposed by former President Donald Trump would cost the average American family an estimated $1,700 annually—and lower-income households would be hit relatively harder, a new analysis warns.
Trump has called for a 10 percent across-the-board tariff on all imports combined with higher tariffs (potentially as high as 60 percent, he’s claimed) aimed specifically at imports from China. Together, those two policies would cost Americans about $500 billion per year, according to the Peterson Institute for International Economics (PIIE), a trade-focused think tank.”
“Former President Donald Trump’s plan to impose a 10 percent tariff on all imports to the United States would hike prices and cost the average American household $1,500 annually.
That’s the sobering conclusion reached by a new economic analysis from the Center for American Progress (CAP) Action Fund, a left-leaning think tank and advocacy organization. The proposed tariff, which would be applied on top of existing tariffs according to Trump’s campaign, would translate into $1,500 in higher costs for the average American household. That includes “a $90 tax increase on food, a $90 tax increase on prescription drugs, and a $120 tax increase on oil and petroleum products,” according to Brendan Duke and Ryan Mulholland, the two economists who authored the report.”
“trade doesn’t need to balance. I have a trade deficit with my supermarket. They get more of my money every year. So, what? I don’t “lose.” I get food without having to grow it myself.
That’s a win for me and the food producer regardless of whether the food was grown locally or came from Mexico.
“Imports are great,” says Lincicome. “It means I can focus on what I want to do for a living and not go make my own food or make my own clothes. I can use those savings and buy other things that makes me better off.”
As long as trade is voluntary, trade is a win for both parties. It has to be; neither side would agree to it unless they think they get something out of the deal.”
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“Manufacturing output in the U.S. is near its all-time high. We make more than Japan, Germany, India, and South Korea combined.”