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Economic Policy


TRUMP VOWS MASSIVE NEW TARIFFS IF ELECTED, RISKING GLOBAL ECONOMIC WAR


FORMER PRESIDENT FLOATS 10 PERCENT TAX ON ALL FOREIGN IMPORTS AND CALLS FOR
ECONOMIC ‘RING AROUND THE COLLAR’

By Jeff Stein
Updated August 22, 2023 at 2:00 p.m. EDT|Published August 22, 2023 at 11:31 a.m.
EDT

Donald Trump waves to the crowd on the campaign trail at the Iowa State Fair
this month. (Demetrius Freeman/The Washington Post)

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Even in the face of growing personal legal peril, Donald Trump summoned his top
economic advisers to his private golf club in New Jersey for a two-hour dinner
last Wednesday night to map out a trade-focused economic plan for his
presidential bid.


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Trump and top aides, including former senior White House officials Larry Kudlow
and Brooke Rollins, as well as outside advisers Stephen Moore and former House
speaker Newt Gingrich, spent the dinner discussing how Trump could attack
President Biden in the 2024 election on the economy, amid a recent spate of
positive economic news that has buoyed Biden’s fortunes, according to three
people familiar with the meeting, who spoke on the condition of anonymity to
describe the private event.



Among the ideas they discussed was Trump’s plan to enact a “universal baseline
tariff” on virtually all imports to the United States, the people said. This
idea, which Trump has taken to describing as the creation of a “ring around the
U.S. economy,” could represent a massive escalation of global economic chaos,
surpassing the international trade discord that marked much of his first
administration. Trump advisers have for months discussed various potential
levels to set the tariff rate, and they said the plan remains a work in progress
with major questions left unresolved, the people said.

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On Fox Business on Thursday, the former president called for setting this tariff
at 10 percent “automatically” for all countries, a move that experts warn could
lead to higher prices for consumers throughout the economy and could lead to a
global trade war.

“I think we should have a ring around the collar” of the U.S. economy, Trump
said in an interview with Kudlow on Fox Business on Thursday. “When companies
come in and they dump their products in the United States, they should pay,
automatically, let’s say a 10 percent tax … I do like the 10 percent for
everybody.”

Trump touts authoritarian vision in second term: ‘I am your justice’

The proposed expansion of the tariff policy, which aides said is expected to be
a central 2024 campaign plank, reflects how Trump is aiming to expand the power
he wielded in the White House, eyeing sweeping authoritarian measures for his
second term that range from deploying the military to fight street crime to
purging the federal workforce. Trump is opting not to explain this vision to
voters at the first Republican presidential primary debate, being held
Wednesday. Trump said he will not attend.

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Economists of both parties said Trump’s tariff proposal is extremely dangerous.
Adam Posen, president of the Peterson Institute for International Economics, a
Washington think tank, called the idea “lunacy” and “horrifying” and said it
would lead the other major economies around the world to conclude the United
States cannot be trusted as a trading partner. Although aimed at bolstering
domestic production, a 10 percent tariff would hurt the thousands of U.S. firms
that depend on imports, while also crippling the thousands of U.S. firms that
depend on foreign exports, Posen said.

The United States today imposes an average tariff on imports of just above 3
percent, according to Posen. That number is higher for some countries, with
goods coming from China facing an average import duty of 19 percent. “You would
be depriving American families of an enormous amount of choice, making their
lives much more expensive, and putting millions of people out of work,” Posen
said.

Trump could use unilateral authority to exempt whatever countries he chooses
from the automatic import tariffs. It would create enormous opportunities for
influence-peddling, Posen said, following four years of a Trump presidency in
which Saudi Arabia and other nations sought to steer Trump by frequenting his
private businesses. “It is a recipe for corruption,” Posen said. “They will
decide that whoever cozies up to Trump, or whoever his commerce secretary is,
will get the exception.”

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Even former Trump economic officials were sharply critical of the idea. “A
tariff of that scope and size would impose a massive tax on the folks who it
intends to help,” said Paul Winfree, an economist who served as Trump’s deputy
director of the Domestic Policy Council and is now president of the Economic
Policy Innovation Center, a center-right think tank. “It would get passed along
through higher prices at a time when the Federal Reserve has had difficulty
limiting inflation.”

Republicans may have to rethink economic attacks as inflation falls

Jason Miller, a spokesman for Trump, pushed back on the criticisms, pointing out
that Trump’s tariffs had coincided with low inflation during his administration.
Miller pointed to an International Trade Commission finding earlier this year
that Trump’s steel and aluminum tariffs significantly led to a decrease in
imports from China, with only minimal increases in prices.

“The globalists who push false claims of economic disaster have been proven
wrong time and again,” Miller said in an email. “No amount of fearmongering from
special interests and establishment hacks in Washington will stop him from
defending American workers and fighting to return millions of manufacturing jobs
to the USA.”

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Although Republicans have long expressed confidence that they can effectively
attack Biden’s economy, Trump’s team may find that task harder than initially
anticipated. Inflation is slowing, recession fears are abating and Biden’s aides
are newly confident about the economic upswing that they hope will carry through
the 2024 election.

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Trump disrupted the bipartisan policy consensus in 2016 when he ran for
president demanding the United States confront China through trade protectionism
and other populist policies. As president, he used his unilateral authority to
impose tariffs on a wide range of foreign products, including solar panels,
washing machines, steel and aluminum.

In 2018, Trump escalated that strategy by slapping tariffs on $200 billion worth
of imports from China, leading Beijing to impose retaliatory tariffs on U.S.
agricultural exports. Trump also imposed tariffs on Mexico and Canada, before
signing a new trade deal with the country’s North American allies in 2019. The
legacy of these measures is hotly debated: Most economists said they hurt the
U.S. market, contributing to global economic head winds and slowing business
investment.

Judge approves $200,000 bond for Trump in Georgia election case

But most of the trade barriers Trump imposed on China were ultimately extended
by the Biden administration, and they have been praised by influential unions
for promoting domestic industry. Biden has taken economic measures that have
fueled international trade tensions, including domestic subsidies for
clean-energy firms that have been sharply criticized by the European Union.

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Trump’s universal tariff plan, however, would represent a dramatic
intensification of economic nationalism that could draw more significant
reproaches from foreign governments, experts said. Two Trump aides, who spoke on
the condition of anonymity to describe campaign deliberations, said no rate had
been settled on for the policy.

The aides said the Trump campaign was likely to provide more details as the
election season progresses. Trump has also said revenue raised by the tariff
would be used to reduce taxes on domestic companies, although it would
effectively be a tax on American consumers that would raise their costs.

“It will be controversial,” Gingrich said in an interview. Gingrich said the
policy would amount to returning to Republican Party roots during the late 19th
and early 20th centuries, when large domestic companies pressed for trade
restrictions to reduce foreign competition. “When we were the dominant economy,
free trade was the rational strategy. Whether that is still a rational strategy
is unclear.”

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The policy idea reflects how much Trump has changed the Republican Party, which
had more recently been allergic to these kinds of trade restrictions. Robert E.
Lighthizer, who served as U.S. Trade Representative under Trump, has suggested
imposing a universal tariff at 10 percent or higher, and then increasing or
decreasing it as necessary, but emphasized in an interview he was not tied to
any specific numbers.

DeSantis unveils economic plans like Trump as he trails in the polls

“We have had people across this country, in the Midwest but elsewhere too, where
you drive through and you see this blight that is the result of U.S. policy that
went off the rails in the 1990s,” Lighthizer said, arguing that Trump tried to
reverse that decline through his industrial policy.

Chris Clarke, an economist at Washington State University, said the tariffs that
Trump imposed on imported washing machines cost American consumers roughly
$800,000 for every job saved. But later studies, which took into account the
impact of retaliatory tariffs as well, found that the tariffs did not save any
jobs, Clarke said.

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“On net, this would harm the American economy substantially” and “would gum up
our whole production process,” Clarke said. “Producers would have higher costs,
and now all the consumers are paying higher prices for goods that used to be
imported.”

Michael Strain, an economist at American Enterprise Institute, a center-right
think tank, said international trade restrictions enacted in 1930 are widely
viewed as exacerbating the Great Depression. Trump’s trade war had a chilling
effect on the U.S. economy, Strain said, but if his new plan were enacted, it
could have a far bigger impact.

“It would be a disaster for the U.S. economy. It would raise prices for
consumers and be met with considerable retaliation from other nations, which
would raise the costs facing U.S. businesses. It would reduce employment among
manufacturing workers,” Strain said. “It would be very, very bad.”

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