Former President Donald Trump’s trade agenda amounts to a tripling-down of the trade war he waged during his first term in office.
Not only has Trump called for a 60% tariff on all Chinese goods, the presumptive GOP presidential nominee has said he would impose a tariff of at least a 10% on all $3 trillion worth of US imports.
While Trump has championed aggressive tariffs as a way to protect working-class Americans, new research suggests they would do the opposite.
Trump’s unprecedented trade proposals would inflict “significant collateral damage on the US economy,” costing consumers at least $500 billion a year, or 1.8% of gross domestic product (GDP), according to a paper published Monday by the Peterson Institute for International Economics.
That’s nearly five times the total cost as a share of GDP from the 2018-2019 US-China trade war.
Trump’s tariff proposals would cost the typical middle-income household at least $1,700 a year, the researchers found.
“These policies are more likely to hurt than help the lower- and middle-income Americans they purport to benefit,” authors Kimberly Clausing and Mary Lovely, senior fellows at the Peterson Institute, wrote in the paper, titled “Why Trump’s Tariff Proposals Would Harm Working Americans.”
The paper stresses that the $1,700 hit to the typical family is just the minimum impact, as the estimate does not include damage from foreign retaliation, slower economic growth and lost competitiveness. The authors warn the actual impact could be twice as high.
“This is the tip of the iceberg,” Clausing, chair in tax law and policy at the UCLA School of Law, told CNN in a phone interview. “The cost of retaliation will be very large. The Europeans will tariff us. The Mexicans and Canadians will be very upset. People aren’t going to take it lying down.”
Of course, Trump is hardly alone in embracing tariffs.
President Joe Biden largely kept in place the Trump-era tariffs – even though he criticized them in the lead-up to the 2020 election.
“Despite having ample opportunity,” the authors wrote, Biden has “failed to remove” the China tariffs that “continue to harm American households, although to a far smaller degree than Trump’s proposed tariffs would do.”
Biden hasn’t just kept the Trump tariffs in place. He has added to them, albeit in a much more targeted way.
Treasury Secretary Janet Yellen, in remarks she delivered Tuesday morning in Frankfurt, Germany, called on Europe to join the United States in its effort to fight back against a flood of cheap Chinese goods entering the global marketplace.
“Industrial overcapacity not only poses a threat to firms in the U.S. and Europe. It could also prevent countries around the world, including emerging markets, from building the industries that could power their growth,” Yellen said. “If we do not respond strategically and in a united way, the viability of businesses in both our countries and around the world could be at risk.”
Last week Biden announced increased tariffs on $18 billion worth of Chinese goods, including steel, aluminum, computer chips, electric vehicles and solar cells.
Clausing, a former Biden official at the Treasury Department, told CNN that a rough estimate suggests these targeted Biden tariffs will cost the typical family approximately $30 a year.
“Eighteen billion dollars is incredibly small relative to $3 trillion. Those aren’t comparable numbers,” Clausing said, referring to the amount of imports targeted by Biden and by Trump tariffs.
Karoline Leavitt, the Trump campaign’s national press secretary, said in response to the research that Trump negotiated better trade deals during his first term that boosted the US economy.
“The American people don’t need ‘papers’ from alleged ‘experts’ to know Bidenomics has robbed them of thousands of hard-earned dollars, and they will have more money back in their pockets with President Trump back in the White House,” Leavitt said in a statement to CNN.
Leavitt argued that “out of control spending created the worst inflation crisis in generations” during the Biden administration.
“When President Trump is back, he will reimplement his America First, pro-growth, pro-job agenda and cut good trade deals that uplift the American worker and family,” she said.
To be sure, Trump has legitimate gripes with China on trade.
Many Democrats and CEOs share concerns about China’s trade practices, including alleged theft of trade secrets, “dumping” goods at artificially cheap prices and other moves that make it difficult to compete on a level playing field.
However, some economists have expressed alarm at the massive tariff proposals from Trump, who famously labeled himself “Tariff Man” in 2018.
Moody’s recently estimated that even if Trump cushioned the blow from tariffs with tax cuts, his trade proposals would cost the US economy 675,000 jobs, worsen inflation and shrink GDP by 0.6 percentage points.
Mark Zandi, chief economist at Moody’s, told CNN last month that the US economy would likely plunge into a recession when factoring in retaliation from other nations.
The Peterson Institute research found that even the high end of projections for revenue generated would fall “far short” of what would be needed to pay for an extension of Trump’s tax cuts, which are set to expire at the end of 2025.
It would cost approximately $4.6 trillion if the Trump tax cuts are extended for the next decade, according to a recent Congressional Budget Office report.
The benefits from expanding the Trump tax cuts would go “disproportionately to the top end of the income distribution,” the Peterson Institute researchers found.
Bigger picture, the risk of a broader global trade fight could also impact international affairs.
The Peterson Institute authors argued the trade tensions would make it harder for nations to collaborate on other critical issues such as climate change, public health emergencies, security and nuclear proliferation.
“In short, the proposed policies come with serious national security risks,” they wrote.
The Peterson Institute trade analysis assumes that tariffs are “fully passed on to US buyers” – a finding disputed by Trump, who has repeatedly suggested that other nations are paying for US tariffs.
However, many experts say US consumers and businesses pay the cost of the tariffs.
“The 2018-2019 tariffs clearly raised consumer prices,” Goldman Sachs economists wrote in a recent report to clients, adding that these price increases were “borne almost entirely by US businesses and households” – not Chinese exporters.
Likewise, the US International Trade Commission found in a 2023 study that US importers “bore nearly the full cost” of tariffs. That independent agency estimated that prices increased by about 1% for each 1% increase in tariffs on Chinese-made goods, steel and aluminum.
“In contrast to Trump’s frequent, and mistaken, claims that foreigners bear the impact of tariffs, economists have long understood that tariffs burden domestic purchasers of imported goods,” the Peterson Institute paper said. “The data show that higher tariffs are fully reflected in higher prices for US buyers.”
No matter who wins in November, tariffs are expected to remain in favor in Washington – especially on China.
Both parties have embraced tariffs as a way to show they are tough on China, and there is little appetite to back down – even though economists say lower tariffs could help ease inflation.
Policies that favor American factories are “arguably the most bipartisan issue in an increasingly partisan Washington,” Chris Krueger, managing director of TD Cowen’s Washington Research Group, wrote in a note to clients on Monday.
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