Trump’s ‘America First’ platform, which he built his successful campaign around, promised to reconfigure global trade in favour of the US. This involved encouraging businesses to manufacture domestically, bringing jobs, industry and prosperity back to parts of the country that liberalised trade and outsourcing left behind. The US had, or so the argument goes, become more and more reliant on competitively priced imports that were often manufactured by countries where labour and transportation is much cheaper. This led to the emergence of Rust Belt states in which blue collar workers saw their living standards decline whilst the cities they lived in were hollowed out.
The chosen tactic for this grand economic reconfiguration, it seems, is trade tariffs. By imposing tariffs on foreign goods, especially Chinese imports, Trump hopes to make it more expensive for consumers to buy products that are made abroad and for companies to outsource manufacturing. This, he claims, will breathe life back into the US industrial heartland and make the country more self-sufficient in times of crisis. It will also reduce the trade deficit, making the US less vulnerable to currency manipulation (which Trump accuses China of) and less dependent on consumption.
Another critical aspect of Trump’s tariff policy is its effect on the U.S. dollar. By imposing tariffs on foreign imports, Trump hopes to weaken the dollar, since global demand for the dollar will decline as a result. As such, this would make American-made products more competitive in the global market which, in turn, will boost exports. This, Trump hopes, would provide long-term stability and prosperity for the American economy and reward blue collar voters who overwhelmingly backed him.
However, not only do tariffs have serious economic drawbacks that make their success uncertain, they also fail to address the root cause of the problem. Tariffs are essentially taxes on imported goods, and while they may benefit some domestic producers in the short term by making foreign goods more expensive, they also increase the cost of imports for U.S. consumers and businesses. These higher costs, combined with potential retaliatory tariffs from trading partners, could hurt U.S. consumers, who would face higher prices on a range of goods, from electronics to clothing, which would hurt economic growth.
In fact, China has already announced a retaliatory tariff of 34% and they are even considering not enforcing US intellectual property rights which could have a devastating impact on US businesses. The European Union, as well as India and Turkey, are also preparing counter measures which will harm US exports. Whilst the USA does have a huge domestic market that the entire world wants to tap into, US businesses are also heavily reliant on consumer markets around the world. Tariffs can have unpredictable consequences since there are so many moving parts and, as such, they are no quick fix for the economic woes of the US.
