“”Former President Donald Trump’s proposals to impose a universal tariff of 20 percent and an additional tariff on Chinese imports of at least 60 percent would spike the average tariff rate on all imports to highs not seen since the Great Depression,” warns Erica York of the Tax Foundation.
Trump has actually been a little vague on the size of his universal tariff, first floating it at 10 percent while allowing “it may be more than that,” and then upping the ante to 20 percent. Either way, it’s a cost that ends up being largely paid by Americans in terms of higher retail prices and more expensive imported parts and materials for domestic manufacturing.
The Trump administration’s 2018 “tariffs resulted in higher prices for a wide variety of goods that U.S. consumers and businesses purchase,” the Tax Foundation’s Alex Durante and Alex Muresianu concluded.
Even when tariffs don’t directly affect the cost of imported goods purchased by consumers, they still drive up the prices of many things made in the U.S. The Cato Institute’s Pierre Lemieux points out that “a tariff on an input (say, steel) is paid by the American importer who will typically pass it down the supply chain to his customers and eventually to the consumers of the final good (say, a car).” Instead of boosting domestic production, that can do harm, instead.
“For manufacturing employment, a small boost from the import protection effect of tariffs is more than offset by larger drags from the effects of rising input costs and retaliatory tariffs,” Federal Reserve Board economists found when they researched the 2018 tariffs.”
“Check the U.S. Constitution, and you’ll see that Article 1, Section 8 clearly gives Congress sole authority over “Taxes, Duties, Imposts, and Excises.” Unfortunately, Congress traded away much of that power during the 20th century, beginning in the aftermath of the Great Depression—which was considerably worsened by a series of tariffs passed by Congress—and continuing with various laws passed in the 1960s and 1970s, as the Cato report details.
In theory, handing over those powers made sense. Lawmakers were more likely to be influenced by parochial interests and would favor protectionism that benefited some local industry, even if it came at the expense of the nation’s economy as a whole. Presidents, it was assumed, would take a more expansive view of the benefits of trade and would use those powers to reduce barriers like tariffs.
For a long time, that was true. It no longer is. Both Trump and President Joe Biden have favored protectionism, and have faced scant opposition from Congress or the courts.
If Trump returns to the White House in 2025, he would assume huge power over the flow of goods into the United States “without substantial procedural or institutional safeguards” due to the “broad and ambiguous language” included in many of those trade laws passed decades ago, Packard and Lincicome write.
The tariffs that Trump imposed during his term in office took advantage of many of those same powers.”
“The Republican presidential nominee’s threat to impose new tariffs on nearly all imports into the United States would make video game consoles 40 percent more expensive, according to an analysis published this month by the Consumer Technology Association (CTA), an industry group best known for its annual Las Vegas conference showcasing the latest tech for home and personal use.
The report assumes that Trump can carry out his threat to hit all imports from China with a 60 percent tariff, along with a baseline tariff of 10 percent or 20 percent on all other imports. (Trump has been unclear about which level he’d prefer, and recently suggested a “thousand percent tariff.”)
If that happens, the retail price of video game consoles will increase by nearly $250, according to the CTA. Retail price would also grow for laptops (up $357), tablets (up $201), smartphones (up $213), and televisions (up $48).”
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“The theory behind Trump’s push for more tariffs is that making imports more expensive will spur more domestic manufacturing. Instead of importing Xboxes and PlayStations from China, those products would be made in the United States, his supporters claim.
But hold on. If Trump’s tariffs are sufficient to drive consumer technology manufacturing out of China, those jobs won’t all shift to the United States—they’ll go to other countries instead. If that happens, consumers in the U.S. will still bear the cost of the universal tariffs on their game consoles and smartphones.
CTA does project a 31 percent increase in domestic production of video game consoles—but that would not be enough to offset the other consequences. Ultimately, the group comcludes, the economy would shrink by an estimated $4.9 billion, due to the combination of higher costs and lower consumer spending power.
The vastly increased availability and affordability of tech like TVs and video game systems shows what free trade can achieve. Americans should be cautious about taking it for granted.”
“Trump fans applauded when he said he’ll eliminate taxes on tips. Then Harris proposed that, too. Her audience applauded. Trump then proposed not taxing overtime. More applause.
But narrow tax exemptions are bad policy.
In my new video, economist Allison Schrager explains how they create nasty, unintended consequences.
“No one likes tipping,” says Schrager, “but all of a sudden, you’ll have to pay tips for everything.…More people will be paid in tips.””
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“Trump’s proposal to eliminate tax on overtime would reduce hiring.
“Employers may hire fewer people so they can give more overtime to employees they have already,” says Schrager.”
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“rent control is destructive. “Sounds really good,” says Schrager. “But all it means is that people are less inclined to rent to you.”
“Why would you enter a market where it seems like the government is actively trying to hurt you?” Adds Mercatus Center economist Salim Furth. “You’re providing an essential service, something human beings need to live, and the government views you as a hostile outsider. I wouldn’t want to bring any service into a market like that.”
Argentina’s new libertarian president just scrapped rent controls. The supply of rental apartments doubled, and prices declined by 40 percent! That’s good policy.
But Harris proposes the opposite!”
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“Trump’s (and Joe Biden’s) tariffs don’t just punish China, they reduce choice and raise prices in America.
“Free trade is good!” says Schrager. “It brings lower prices, making our own industries more dynamic, raising our income.”
“But trade does take away some Americans’ jobs,” I point out.
“But it creates a lot of other new jobs,” she replies.
It sure does. More and better jobs than those lost through trade.”
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“She proposes giving “first-time homebuyers” $25,000. Again, her fans applaud.
Schrager explains, “free” money from government doesn’t increase the supply of homes. When every buyer has $25,000 more, “they just bid up prices even higher!””
“The Tax Foundation estimates that a 10 percent general tariff “would raise taxes on American consumers by more than $300 billion a year,” “reduce the size of the U.S. economy by 0.7 percent,” and “eliminate 505,000 full-time equivalent jobs.” Retaliation could “further reduce U.S. GDP by 0.4 percent and eliminate another 322,000 full-time equivalent jobs.”
Trump’s proposed tariffs, including a 60 percent levy on Chinese goods, “would reduce after-tax incomes by about 3.5 percent for those in the bottom half of the income distribution,” the Peterson Institute for International Economics estimates. They “would cost a typical household in the middle of the income distribution at least $1,700 in increased taxes each year.”
Just as Trump ignores those costs, Harris wants voters to believe that raising the corporate income tax rate from 21 percent to 28 percent is simply a matter of “ensur[ing] the wealthiest Americans and the largest corporations pay their fair share.” But that is true only if you overlook the broader economic impact of that change, which would hurt non-wealthy Americans as employees, consumers, and investors.
“Studies have shown that the corporate income tax is the most harmful tax for economic growth,” the Tax Foundation warns. On the flip side, recent research indicates that the Trump-backed 2017 reduction in this tax rate, which moved the U.S. from the high end among industrialized countries to the middle of the pack, “significantly boosted domestic investment.”
By raising the cost of doing business in the United States, a higher corporate tax rate inhibits investment, drives down wage and benefit growth, encourages offshoring of jobs, and reduces the return on retirement savings. “Under a 28 percent corporate rate,” the Tax Foundation estimates, “GDP would fall by $1.84” for “every $1 of higher revenue.””
“The signature policy proposal of Donald Trump’s third campaign for the presidency is a tariff: a tax of 60 percent imposed on all imports from China and 10 percent on imports from any other country. Not only does he want this tax hike, which would raise about $291 billion or 1 percent of GDP when fully implemented, but he says he’ll do it unilaterally. “I don’t need Congress, but they’ll approve it,” Trump declared at a September 23 rally. “I’ll have the right to impose them myself if they don’t.”
This is a rather enormous policy change for a president to undertake unilaterally, and one of dubious legality. For comparison, the hike Trump is considering is over twice as large as the tax increases used to fund Obamacare. (And make no mistake — tariffs are tax increases.) Experts like former World Trade Organization (WTO) deputy director-general Alan Wm. Wolff have argued that no law passed by Congress gives the president the power to levy across-the-board tariffs along the lines Trump proposes.
Even so, Congress has given the executive branch a remarkable amount of flexibility to set tariffs. This is a mistake. Members of Congress, whether or not they support Trump’s tariff plans, should be able to agree on this much: As the Constitution lays out in the taxing clause, it’s Congress’s job to set taxing and spending policy for the United States. It’s been that way for the US’s whole history, it’s the traditional role of legislatures in all democratic countries, and putting this power instead in the president’s hands cuts the people’s representatives out of the process of determining how they are taxed — a concept that goes back to before the American Revolution.”
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“The presidential power to impose tariffs does not originate from a simple bill or program; rather, it slowly accreted over time, with a particular expansion over the past decade as the Trump administration rediscovered authorities in old laws that enabled it to wage a trade war with China and protect the steel industry.
Section 232 of the Trade Expansion Act of 1962, for instance, gives the president the right to levy tariffs upon the secretary of commerce’s recommendation without asking Congress. This was the authority Trump used to slap tariffs on steel and aluminum back in 2018, tariffs which Biden recently expanded slightly.
Section 301 of the Trade Act of 1974 gives a similar power to impose tariffs based on unfair trade practices by foreign nations on the advice of the Office of the US Trade Representative. Trump used this power to impose sweeping tariffs against China. Biden has made liberal use of this power, too, expanding tariffs on steel, batteries, solar cells, and electric vehicles from China.
Finally, there’s Section 201 of that same 1974 law, which allows tariffs against imports that “seriously injured or threatened … serious injury” to domestic companies. Trump and Biden have used this to justify tariffs on washing machines and solar cells from most countries.
Even if Trump couldn’t implement a full 10 percent tariff on all imports with his executive powers — because the previous authorities apply only to specific industries or specific countries — he could make a lot of progress toward that goal. His 60 percent tariff on all Chinese imports, for instance, may very well be possible because it’s narrowly targeted at one nation. He and Biden have proven that the president can, without Congress, raise taxes on imports very significantly.
I happen to think most of both Trump and Biden’s tariffs were wrongheaded and that Trump’s plan for more sweeping tariffs amounts to a significant tax increase on the poor and middle class that would hurt US exports, invite retaliation from other countries, harm America’s international reputation, and fail to create any jobs for people who need them. (Vice President Kamala Harris has attacked the Trump tariff plan as a “sales tax” but hasn’t disavowed Biden’s tariff policies.)”
“Also overlooked by those claiming that 19th-century tariffs made America great is that the country’s biggest import at the time was immigrants, who incurred no tariffs. As economists Cecil Bohanon and T. Norman Van Cott argue in “Tariffs, Immigration, and Economic Insulation,” weighing the impact of tariffs on economic growth without accounting for massive immigration—which increased from about 200,000 individuals a year in 1865 to more than 1,000,000 in 1910—can only lead to questionable conclusions. They explain that “the impact of high tariffs, clearly an insulating policy, was swamped by free immigration, a quintessential policy of economic openness.”
Trump is an avowed restrictionist on both immigration and trade. And so, if a second Trump presidency brings higher tariffs and further immigration restrictions, we won’t be as fortunate as were our 19th century forebears.
Making matters worse is that today’s economy is vastly different from that of a century ago. Globalization has interconnected markets and supply chains in unprecedented ways. Half of what Americans import are inputs they use to produce goods domestically. Tariffs on these imports increase production costs, making American products less competitive both at home and abroad.
Furthermore, the service sector—comprising industries like technology, finance, and health care—now represents nearly four-fifths of the U.S. economy. These sectors thrive on innovation, skilled labor, and access to global markets, rather than on protectionist policies.”
“Unfortunately, the poll also suggests that Americans—just like their elected officials—may be a bit confused on the subject.
Seventy-five percent of respondents indicated being “very concerned” or “somewhat concerned” “about rising prices of things you buy because of trade tariffs.” But a majority would also support imposing tariffs on certain products, under certain conditions, if they felt it would help American businesses. For example, 62 percent said they would support “adding a tariff to blue jeans sold in the US that are manufactured in other countries to boost production and jobs in the American blue jean industry”—though, notably, 66 percent would oppose a tariff if it raised the price of a pair of jeans by $10.
Further, when asked, “From what you’ve read and heard, who primarily is responsible for paying for the cost of a U.S. tariff,” only 47 percent answered that it was American consumers. The next highest answer was “Not sure” at 20 percent, followed by 15 percent who said the U.S. government pays, 12 percent who said foreign companies pay, and 5 percent who said foreign governments pay the tariffs.
Despite Trump’s claims that exporting countries pay tariffs, it is indeed consumers who pay in the form of higher prices. On the campaign trail in 2019, Biden claimed—accurately—that “Trump doesn’t get the basics. He thinks his tariffs are being paid by China. Any freshman econ student could tell you that the American people are paying his tariffs.” And yet as recently as last month, Biden was proposing 25 percent tariffs on imports from Mexico that use Chinese steel.
While not entirely consistent on the subject, the survey suggests that Americans largely recognize the positive effects of international free trade. It’s a shame, then, that our politicians don’t.”
“Economists understand that tariffs ultimately raise the prices of goods they are applied to. Tariffs are a tax on imported goods. This tax is paid by consumers. Americans must shoulder the additional cost for the same imported goods or pay higher prices for domestically made substitutes (whose quality might also deteriorate because their producers are shielded from foreign competition).”
“higher corporate taxes are passed along to consumers, employees, and investors in the form of high prices, lower wages, and lower investment returns. If you buy things, have a job, or save for retirement, higher corporate income taxes will fall on you”
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“Saying that tariffs penalize only importers is almost exactly like saying that a corporate income tax affects only corporations. Both are deliberately myopic attempts to ignore the consequences of these policies. And in both cases, the candidates are assuring voters that someone else will pay the cost of these tax hikes—wealthy corporations or China—despite a well-established track record showing that both forms of taxes are passed along to consumers and workers in various ways.
You can try to tax corporations and you can try to tax imports, but all taxes are paid by people in the end—including lots of people who make less than $400,000 annually.”