Donald J. Trump plans to sharply expand his use of tariffs if he returns to power, risking disruption to the economy in an attempt to transform it.
“We will impose stiff penalties on China and all other nations as they abuse us,” former President Donald J. Trump said at a recent rally. Tariffs of up to 10 percent on most foreign goods are possible.
Former President Donald J. Trump is planning an aggressive expansion of his first-term efforts to upend America’s trade policies if he returns to power in 2025 — including imposing a new tax on “most imported goods” that would risk alienating allies and igniting a global trade war.
While the Biden administration has kept tariffs that Mr. Trump imposed on China, Mr. Trump would go far beyond that and try to wrench apart the world’s two largest economies, which exchanged some $758 billion in goods and services last year. Mr. Trump has said he would “enact aggressive new restrictions on Chinese ownership” of a broad range of assets in the United States, bar Americans from investing in China and phase in a complete ban on imports of key categories of Chinese-made goods like electronics, steel and pharmaceuticals.
“We will impose stiff penalties on China and all other nations as they abuse us,” Mr. Trump declared at a recent rally in Durham, N.H.
In an interview, Robert Lighthizer, who was the Trump administration’s top trade negotiator and would most likely play a key role in a second term, gave the most expansive and detailed explanation yet of Mr. Trump’s trade agenda. Mr. Trump’s campaign referred questions for this article to Mr. Lighthizer, and campaign officials were on the phone for the discussion.
Essentially, Mr. Trump’s trade agenda aims at backing the United States away from integration with the global economy and steering the country toward becoming more self-contained: producing a larger share of what it consumes and wielding its might through one-on-one dealings with other countries.
Mr. Trump, who calls himself a “tariff man,” took steps in that direction as president, including placing tariffs on various imports, hamstringing the World Trade Organization and starting a trade war with China. If he is elected, he plans a more audacious intervention in hopes of eliminating the trade deficit and bolstering manufacturing — with potentially seismic consequences for jobs, prices, diplomatic relations and the global trading system.
His plans — which he has described as “a sweeping pro-American overhaul of our tax and trade policy” — would amount to a high-stakes gamble with the economy’s health, given that unemployment has dropped to 3.7 percent, inflation has substantially cooled from its post-pandemic spike, about 200,000 jobs are being created each month and the stock market is near a record high.
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Robert Lighthizer, middle, was the Trump administration’s top trade negotiator, including for the United States-Mexico-Canada Agreement that replaced NAFTA.Credit…Gesi Schilling for The New York Times
Mr. Trump’s plans have drawn warnings from trade experts with more traditional economic views. Daniel M. Price, a top international economics adviser in the George W. Bush White House, called the plans “erratic and irrational.” He said that the costs would be borne by U.S. consumers and producers, and that the plans would risk alienating allies.
“The last time Trump abusively imposed tariffs on our allies — then for concocted national security reasons — a number of key trading partners, like Japan and South Korea, refrained from retaliating against U.S. exports thinking he would soon come to his senses,” Mr. Price said. “This time they will not indulge that fantasy.”
Evaluating the merits of Mr. Trump’s trade vision is complex because there could be multiple ripple effects, and he is seeking long-term changes. But many economic studies concluded that the tariffs he imposed as president cost American society more than the benefits they produced.
Research from economists at the Federal Reserve and the University of Chicago found that tariffs Mr. Trump imposed on washing machines in 2018 created about 1,800 jobs while raising the median prices consumers paid for new washers and dryers by $86 and $92 per unit. That spending added up to about $817,000 per job.
But Mr. Lighthizer dismissed studies critical of Mr. Trump’s tariffs, describing them as biased in favor of free trade and arguing that inflation had held steady during the administration. He also said that while efficiency, profits and low prices were important, the priority should be encouraging more manufacturing jobs for Americans without college degrees.
“If all you chase is efficiency — if you think the person is better off on the unemployment line with a third 40-inch television than he is working with only two — then you’re not going to agree with me,” Mr. Lighthizer said. “There’s a group of people who think that consumption is the end. And my view is production is the end, and safe and happy communities are the end. You should be willing to pay a price for that.”
Mr. Trump began his presidency in 2017 by hiring economic advisers with diverse views — including advocates of protectionist policies, like Mr. Lighthizer and Peter Navarro, as well as Wall Street veterans oriented toward free trade and skeptical of tariffs, like the former Goldman Sachs president Gary D. Cohn.
But the economic advisers he remains close with are overwhelmingly in the pro-tariff ideological mold, like Mr. Lighthizer. His more aggressive plans for a second term would most likely face far less internal opposition than they did in his first term.
Universal Tariffs
ImageMany economic studies concluded that the tariffs, including on steel, Mr. Trump imposed as president cost American society more than the benefits they produced. Credit…Damon Winter/The New York Times
The most globally far-reaching of Mr. Trump’s 2025 trade policy plans is to impose a so-called universal baseline tariff, meaning a new tax on most imported goods.
The Trump campaign has not specified how high this tariff would be. In an August interview on Fox Business, Mr. Trump threw out a figure of 10 percent, saying “I think we should have a ring around the collar” of the U.S. economy.
Mr. Trump has been vague about other details. Among them, he has not explained whether he envisions the universal tariff as a new floor or an add-on to existing ones. For example, if an imported product was now taxed at 5 percent, would that rate rise to 10 percent or to 15 percent? The latter, Mr. Lighthizer said.
Nor has Mr. Trump said whether the new tariff would apply to imports from the nearly two dozen countries with which the United States has free trade deals. They include Canada and Mexico, which together account for nearly a fifth of the overall U.S. trade deficit in goods, and with which Mr. Trump’s administration renegotiated the nearly tariff-free trade deal that replaced NAFTA.
The Trump campaign noted that Mr. Trump has not announced any decision on that question. But Canada’s ambassador to the United States, Kirsten Hillman, said in an interview that her country believes its exports should be exempted from any new universal tariffs.
“We just concluded this deal with 99 percent of tariffs at zero under the previous Trump administration, so it’s our expectation these proposed policies would not apply to Canada,” she said.
Mr. Trump has also not said whether he thinks he could unilaterally impose the sweeping new tariff under existing law or would need Congress to authorize it.
Clete Willems, who served as deputy assistant to the president for international economics in the Trump administration, said in an interview that he sympathized with Mr. Trump’s desire for reciprocity, but added: “The president’s authority to enact across-the-board tariff hikes is unclear, and I’m skeptical Congress is going to endorse it.”
But Mr. Lighthizer said that given the size of the U.S. trade deficit and its impact on the American economy, a president would have “clear authority” under two laws — the International Emergency Economic Powers Act and Section 338 of the Tariff Act of 1930 — to impose tariffs unilaterally.
Still, he said, depending on political conditions, Mr. Trump might instead choose to ask Congress to enact new legislation so that a successor would not be able to easily revoke it. “He has the legal authority to do it and he’s got two routes,” Mr. Lighthizer said. “He hasn’t made that choice as far as I know.”
Regardless of the legal authority, a swirl of dislocating losses and gains would ripple out from such a policy of universal tariffs. On the one hand, some domestic manufacturing would rise since domestic makers of rival goods could raise their prices and expand production. That is Mr. Trump’s focus: “We will quickly become a manufacturing powerhouse like the world has never seen before,” he promised in a campaign video.
As a matter of textbook economics, there would also be downsides. It would amount to a tax increase passed onto consumers in the form of higher prices — one that would fall more heavily on poorer people since they spend a higher portion of their incomes on goods.
The policy could also lead to downward pressure on other domestic manufacturing. Producers who buy inputs from abroad would pay higher costs, making their products less competitive in the global market. Retaliatory tariffs would reduce demand for U.S. exports.
Decoupling From China
ImageMr. Trump has said he would attempt to wrench apart the American and Chinese economies, which exchanged some $758 billion in goods and services last year. Credit…Ruth Fremson/The New York Times
Mr. Trump has also said he would go much further in imposing “a bold series of reforms to completely eliminate dependence on China in all critical areas.” In 2022, the United States imported $536.3 billion in goods from China and exported $154 billion in goods to it.
Among other things, Mr. Trump has said he would impose “a four-year plan to phase out all Chinese imports of essential goods — everything from electronics to steel to pharmaceuticals,” along with new rules to stop American companies from making investments in China and to inhibit Chinese purchases of U.S. assets.
Still, Mr. Trump also hedged, saying without detail that he would allow “all of those investments that clearly serve American interests.”
The Biden administration has also moved to impose greater restrictions on economic exchanges with China, but in a more narrowly tailored way. The government bars the export of certain technology with military applications to China, and in August, President Biden signed an order banning new American investment in Chinese companies that are trying to develop things like semiconductors and quantum computers.
Mr. Trump is now proposing going even further, calling for revoking China’s “most favored nation” trade status, meaning repealing the permanent normal trade relations and lower tariffs the United States granted to China after it joined the World Trade Organization in 2001. Notably, a House committee this month unveiled a bipartisan report calling for taking that step, too.
Doing so would significantly disrupt the U.S. economy, according to a study published last month by Oxford Economics, which was commissioned by the U.S.-China Business Council. It estimated that the resulting increase in tariffs would lead to a $1.6 trillion loss for the U.S. economy and 744,000 fewer jobs over five years.
In his 2023 memoir, “No Trade Is Free,” Mr. Lighthizer acknowledged that U.S. businesses that operate in China and those that rely on Chinese imports would object to that idea, but asserted that more manufacturing of products like computers and cellphones would “eventually” return to the United States or its allies, benefiting American workers and the country.
He also wrote that inevitable Chinese retaliation to harm U.S. exports would further “contribute to the strategic decoupling” of the two economies. “Anyone who concedes that China is a problem but insists that there is some magical, disruption-free solution to the problem China presents is quite likely a liar, a fool, a knave, an irredeemable globalist, or some combination thereof,” he wrote.
Decades of Railing Against Deficits
ImageAn abandoned industrial building in Rockford, Ill. Critics have pointed to the social decay caused by closing factories around the country as a downside of trade.Credit…Jamie Kelter Davis for The New York Times
Mr. Trump’s economic nationalism has helped him change the Republican Party. He has assembled a more working-class coalition than the G.O.P. used to attract before he was the party’s standard-bearer.
His views are a throwback to a mercantilist approach to trade, in which countries used high tariffs to protect and develop their domestic manufacturing capabilities. The Trump campaign website states that his trade policy “is firmly rooted in American history” because America “used to impose tariffs on over 95 percent of all imports.” That statistic is from before the Civil War, when tariffs made up the vast majority of the federal government’s revenues.
Throughout the 20th century, many economists came to see this approach as myopic. By the 1990s — despite opposition from labor unions — a bipartisan consensus formed in favor of freer trade. The idea was that lowering tariffs and increasing trade would raise the overall material prosperity of society by improving efficiency and lowering prices.
But those gains have not been evenly distributed, and over time, various forms of disillusionment with lower trade barriers have arisen.
Inside the United States, critics on both the left and the right have increasingly pointed to the downsides of trade for working-class communities. Social decay spread as corporations closed factories where they could shift to cheaper overseas production, contributing — along with other factors, like rising automation — to the stagnation of working-class wages. Supply-chain disruptions during the pandemic focused attention on another risk of globalization.
And there is growing anxiety about the security implications of America’s reliance on China for certain critical goods and resources, and anger at China’s practices of forcing companies to share technology and its outright theft of trade secrets.
Politically, Mr. Trump was ahead of the pack in focusing on the downsides of free trade. For more than 30 years, he has railed against trade deficits, which he views like company balance sheets as a simple matter of profits and losses. He complains that foreign countries that export more to the United States than they import from it are ripping America off.
In 2017, Mr. Trump would consistently ask his briefers a simple question before his calls with foreign leaders, according to a person with direct knowledge: “What is the trade deficit?” The answer would often set Mr. Trump’s mood for the call and how friendly he would be to the head of state.
Mr. Trump withdrew the United States from the Trans-Pacific Partnership, President Barack Obama’s signature trade deal. His administration crippled the W.T.O.’s ability to resolve trade disputes between countries by blocking its ability to replace members of an appellate body.
Mr. Trump imposed tariffs on certain imports, raising prices on washing machines, solar panels as well as steel and aluminum. And he started a trade war with China, ultimately imposing tariffs on more than $360 billion of Chinese products.
Despite Mr. Trump’s aggressive tariffs, Census Bureau data show that the annual trade deficit in goods grew from $735 billion in 2016 to $901 billion in 2020. But Mr. Lighthizer pointed to a slight dip in the trade deficit in 2019 compared with 2018, arguing that the tariffs were starting to have their intended effect before the upheaval of the pandemic year.
Mr. Trump’s trade wars were costly. After China — which has become the largest export market for American farmers — retaliated by raising tariffs on U.S. agricultural products like soybeans, the Trump administration began a $28 billion government bailout to keep farmers afloat. A February 2020 study calculated that the higher cost of metal for American manufacturers owing to the steel tariffs had caused a loss of about 75,000 jobs.
As aggressive as Mr. Trump’s first-term trade policies were, he did not always go as far as he wanted. Despite threatening to withdraw from the World Trade Organization, for example, he never did. While he loathed NAFTA, his administration negotiated a replacement that, while modernizing various terms, kept in place a nearly tariff-free market with Mexico and Canada.
Mr. Lighthizer, who led those negotiations, wrote in his memoir that whether or not Congress should have passed NAFTA in 1993, abruptly withdrawing from it after decades of economic integration would have caused “an economic and political catastrophe,” sending “shock waves through the economy” and hurting “Trump voters in Texas and throughout the farm belt.”
Ana Swanson contributed reporting.
Charlie Savage writes about national security and legal policy. He has been a journalist for more than two decades. More about Charlie Savage
Jonathan Swan is a political reporter covering the 2024 presidential election and Donald Trump’s campaign. More about Jonathan Swan
Maggie Haberman is a senior political correspondent reporting on the 2024 presidential campaign, down ballot races across the country and the investigations into former President Donald J. Trump. More about Maggie Haberman
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Source: nytimes.com
