Former President Donald Trump loves tariffs. He was completely turned off by them and returned even more sharply to the protectionist policies that were a major part of his campaign. He also has no understanding of how tariffs work or what role they play, and that his proposed policies will hurt American consumers already frustrated by rising inflation. They also don’t understand how they end up imposing higher costs. That’s why it’s perplexing that voters somehow trust Trump to lower prices.
President Trump’s latest love letter to tariffs came at the beginning of a lengthy interview with Time magazine reporter Eric Cortelessa. In recent months, he has suggested the possibility of imposing a flat 10% tariff on all imported goods. In other words, companies that import goods from places like Mexico and China will have to pay 10% of their costs to the U.S. Treasury. But he says the actual amount he’s currently monitoring could be much higher.
Cortelesa: But when you say more than that, you probably mean more than 10% of all imports?
TRUMP: More than 10%, yes. I call it the national ring. We have rings all over the country. In addition to what we said, mutual taxes too. When you do that, the numbers are staggering. I don’t think it will have much of an impact because they make a ton of money off of us. I don’t think the cost will go up that much. And a lot of people say, “Oh, that’s going to cost us more in taxes.” I don’t believe it. I think it’s a tax paid by the country. And I know.
No, he doesn’t know, but this is certainly impressive for someone who has been in charge of America’s economic policy. Contrary to his long-held beliefs, tariffs are paid by importers, not by exporting countries, when goods enter the United States. As my colleague Ryan Teague Beckwith pointed out last month, the choices facing American companies faced with such high tariffs are clear. Can I become a shareholder and lose my job as a result? Or will he just increase prices by 10% to cover costs?” The answer is the latter, which will push up prices that have already skyrocketed in the aftermath of the coronavirus pandemic.
Mr. Cortelesa tried to press Mr. Trump on whether he was satisfied with the inflation associated with the tariff hikes, but Mr. Trump denied that such a thing would happen, before erupting into a semi-related diatribe. . The reporter again asked directly whether they thought companies would pass costs on to consumers. “No, I think you build what happens,” Trump responded. “The way out of this situation is to end up manufacturing products in the U.S. instead of bringing them in from China because of the added cost.”
That’s probably the most convincing answer President Trump can give to that question. That answer happens to be very inaccurate, since the costs of “construction” will still be passed on to the consumer. The Tax Foundation, a nonpartisan Washington think tank, estimates that the net effect of his tariff plan would be more than $300 billion a year in price increases.
It’s bad enough that a former president is so stubbornly wrong about the Econ 101 concept. But what’s really frustrating about Trump’s lack of basic economic understanding is that it’s barely reflected in the polls. A recent NBC News poll showed Trump with a 22-point lead among registered voters when asked who is better at dealing with inflation and the cost of living: Trump or President Joe Biden. (It’s worth noting that this question was posed to his 420 respondents, a fraction of his total of 1,000 respondents.)
But what’s really frustrating about Trump’s lack of basic economic understanding is that it’s barely reflected in the polls.
A separate CNBC poll last month found similar results, with 54% of respondents saying Trump had a better shot at fighting inflation, compared to 27% who said Biden had a better shot. %was. In some ways, Trump is likely benefiting from an intangible nostalgia for his time in office. After three and a half years with Biden in the White House, voters are telling themselves that someone else will be able to handle things better, even though most of the power to curb inflation falls under the Federal Reserve’s purview. It’s easy to do. Even that is something President Trump has just proposed handing over to the president when he took office, demanding that the Fed chair follow guidance from the White House.
But most leading economists agree that Mr. Trump’s proposed economic policies will undoubtedly lead to higher costs. “Most of the major policy initiatives proposed by Donald Trump’s campaign will lead to inflation, whether it’s reducing the trade deficit through tariffs or devaluing the dollar, curbing immigration, or undermining the Fed’s independence.” said Paul Ashworth, chief North American economist at London-based Capital Economics, in an analysis published Monday.
Mr. Biden and other Democrats have begun crafting a message that emphasizes the absurdity of Mr. Trump’s policies and the economic pain they will cause. He has also been active in criticizing corporate greed for rising costs and tax cuts for the wealthy signed by President Trump. Unfortunately, the best he can do is try to sway voters to try to protect them from the damage President Trump will cause. Because, as the Time magazine interview showed, once someone like Trump stands his ground, he’ll accept even the worst ideas, no matter how much evidence there is to show he’s not right. This is because I continue to be particular about it.
