More Trump Tariffs? We Did This Before, and It Didn’t Work Out

Are we really going to do this again? If elected American president for a second time, Donald Trump says he plans to impose a 10 percent tariff scheme on all foreign goods sold in the United States. This proposal unfortunately reminds me of the scene in Moonstruck when Loretta (Cher) tells her father, Cosmo (Vincent Gardenia), of her engagement:

Loretta Castorini : I’m getting married.
Cosmo Castorini : Again?
Loretta Castorini : Yeah.
Cosmo Castorini : You did this once before, it didn’t work out.
Loretta Castorini : The guy died!

Well, President Trump’s wrongheaded protectionism—he applied tariffs on hundreds of billions of dollars of Chinese goods and on steel and aluminum imports from Canada, Mexico, and the EU—didn’t kill the American economy, but it’s hard to declare them anything but a big policy failure. The whole debacle is really basic economics in action. For example: The Trump steel and aluminum tariffs, not surprisingly, prompted retaliation. So even though American steel companies claimed adding 12,800 jobs from the tariffs, the higher metal prices cost steel consumers $11.5 billion—or $900,000 per new job gained. And as the Wall Street Journal reported in 2020:

. . . about 6,000 jobs were added to the U.S. steel industry’s workforce after tariffs started in 2018, according to the Census Bureau. By the end of 2019, though, those gains evaporated as steel demand and prices sank. Higher prices also made steel more expensive for manufacturers that buy it, leading to the loss of about 75,000 U.S. manufacturing jobs.

As for Trump’s China trade deal, recall that candidate Trump made the massive US trade deficit with China a central focus of his campaign. As AEI scholar Derek Scissors points out, however, the average annual US goods trade deficit with China was higher during the first three years of the Trump administration than the final three years of the Obama administration, $378 billion to $353 billion. What’s more, a US Department of Agriculture study found the retaliatory tariffs from Canada, China, the European Union, India, Mexico, and Turkey in the period from mid-2018 to the end of 2019 “caused a reduction of more than $27 billion (or annualized losses of $13.2 billion) in U.S. agricultural exports, with the largest decline in export losses occurring for exports to China.”

And as for this new Trump tariff idea, a new analysis from the Tax Foundation finds that this proposed levy would raise US taxes by more than $300 billion and make goods more expensive for consumers and businesses. It would also strengthen the dollar and make US exports less competitive abroad. Overall, the new Trump trade tax would, according to the Tax Foundation’s model, reduce US GDP by 0.7 percent and eliminate a half million jobs. Then there’s the retaliation factor, with other countries slapping their own taxes on US exports, reducing US GDP by another 0.4 percent and eliminating another 300,000 jobs. From the Tax Foundation: “We know from decades of experience and evidence that tariffs reduce employment, productivity, and output. The past five years have demonstrated that reality all too well.”

A correction: Instead of writing “Are we really going to do this again?,” I should have written “Are we really going to keep doing this?” since President Biden kept Trump’s tariffs on Chinese imports and has embraced other protectionist measures such as “Buy America” restrictions on federal infrastructure funding. In terms of trade, Bidenomics is too faithful a remake of or sequel to Trumponomics.