In March 2018, one day after announcing sweeping tariffs on metal imports from America's allies and adversaries, President Donald J. Trump shared on social media one of his core economic philosophies: “Trade wars are good and easy to win.”
As president, Trump oversaw the largest increase in U.S. tariffs since the Great Depression, slapping heavy tariffs on China, Canada, the European Union, Mexico, India and other countries. They retaliated by imposing tariffs on American soybeans, whiskey, orange juice and motorcycles. U.S. agricultural exports collapsed, prompting Trump to send $23 billion to farmers to offset the losses.
Now that he's running for president again, Trump is pledging to ramp up his trade war even more. He has proposed “universal base tariffs on most foreign products,” including higher levies on certain countries that devalue their currencies. In interviews, he has floated plans for a 10 percent tariff on most imports and a tariff of 60 percent or more on Chinese goods. He has also proposed cutting the federal income tax and raising revenue through tariffs instead.
Trump, who once called himself a “tariff man,” has long argued that tariffs would boost American factories, close the gap between American imports and exports, and increase the number of American jobs.
His first round of tariffs affected over $400 billion worth of imports, including steel, solar panels, washing machines and Chinese goods such as smartwatches, chemicals, bike helmets and engines. His rationale was that import tariffs would revive American manufacturing, reduce dependence on foreign goods and allow U.S. companies to better compete against cheap products from China and other countries.
Economists say the tariffs actually reduced imports and boosted U.S. factory production in certain industries, including steel, semiconductors and computer equipment. But this came at a very high cost that most likely wiped out any overall gains. Studies show that the tariffs led to higher prices for American consumers and factories that depend on foreign suppliers, and that they reduced U.S. exports of certain goods that faced retaliation.
Trump is now considering taxing potentially ten times as many imports as he did during his first term. Economists say this approach could spark a trade war that would further drive up already high prices and plunge the US into recession.
David Autor, an economics professor at the Massachusetts Institute of Technology, said the proposals would have a “very big impact on prices almost immediately.”
“I don't think they will,” Autor said. “It could easily trigger a recession.”
In a recently published letter, 16 Nobel Prize winners in economics wrote that they were “deeply concerned” about the risks a second Trump administration would pose to the economy, inflation and the rule of law.
“We believe that a second Trump term would have a negative impact on the United States economic position in the world and a destabilizing effect on the U.S. domestic economy,” they wrote.
Trump and his supporters view tariffs much more positively: They argue that they serve as leverage over foreign governments, reduce the trade deficit with China and lead to an increase in jobs in the US manufacturing sector.
“I'm a big supporter of tariffs because I believe tariffs do two things: They give us an economic advantage and a political advantage,” Trump said recently in a podcast.
Karoline Leavitt, the Trump campaign's national press secretary, said in a statement: “The American people do not need worthless, out-of-touch Nobel laureates telling them which president put more money in their pockets.”
“President Trump has built the strongest economy in American history,” she said. “In just three years, Joe Biden's runaway spending has unleashed the worst inflation crisis in generations.”
Jamieson L. Greer, a partner in King & Spalding's international trade team who was involved in trade negotiations with China during the Trump administration, said Trump officials believe tariffs “can particularly help protect U.S. manufacturing jobs, especially to the extent that they correct an unfair trade practice.”
China has long had policies that discriminate against American workers, but other countries also have unfair trade and tax policies or misaligned currencies, Greer said.
“If you level the playing field, there will no longer be unfair competition for Americans,” he said.
Trump's tariffs have supporters in the industries that have benefited from them. And President Biden put his own stamp on them by maintaining Trump's tariffs on China while adding some of his own, including on electric cars, steel and semiconductors.
But some of the industries that have suffered most from Trump's trade wars are not looking forward to a continuation. Executives in industries such as retail and liquor fear that another round of tariffs could reignite tensions, drive up their costs and once again shut off key markets abroad.
Spirits exports to Europe fell 20 percent after the European Union imposed a retaliatory 25 percent tariff on American whiskey in response to tariffs on steel and aluminum imposed by the Trump administration. And Chinese tariffs increased the prices retailers had to pay for their products, forcing them to either raise prices for their customers or cut into their profits.
“We need a trade policy, not just more tariffs,” said David French, executive vice president of government relations at the National Retail Federation. His group, which represents department stores, e-commerce sites and grocers, launched a television ad campaign against the Trump tariffs in 2018. “They have only created friction in the supply chain and cost consumers $220 billion.”
“Former President Trump views trade as a kind of zero-sum game – if you win, I lose and vice versa,” French said. “That's really not how trade works.”
The power of tariffs to encourage or hinder exports is evident in industries that ultimately received a reprieve. In 2021, whiskey tariffs were temporarily suspended as part of a deal the Biden administration struck with the European Union. American whiskey exports to the bloc rose from $439 million in 2021 to $705 million last year.
Chris Swonger, chairman of the Distilled Spirits Council of the United States, said he hoped that if Trump is re-elected, he would see that strong exports of American spirits would help him achieve his goal of reducing the trade deficit. The lobby group wants to extend the suspension of EU tariffs, which expires next March.
“Of course, we appreciate and respect President Trump's efforts to reduce the trade deficit,” said Swonger, who has presented his arguments to Trump's campaign team. “Imposing tariffs on spirits would work against the reduction of the trade deficit.”
Research suggests that while the tariffs have achieved their objective of increasing domestic production in the protected industries, they have done so by imposing other costs on the U.S. economy.
According to a bipartisan government study, tariffs on foreign steel and aluminum increased U.S. production of those metals by $2.2 billion in 2021. But American factories that use steel and aluminum to make other things like cars, tin cans and appliances had to pay higher costs for their materials, reducing those factories' production by $3.5 billion that same year.
Studies suggest that the tariffs have had a mixed record on employment as well. In a recent study, Autor and other economists found that the cumulative effect of Trump's trade policies and other countries' retaliatory measures on American jobs was slightly negative, or at best zero.
As for inflation, studies estimate that American households faced higher prices as a result of the tariffs – ranging from several hundred dollars to over $1,000 annually.
But economists say consumers probably did not associate the higher prices with the tariffs because inflation was low and the economy was strong during Trump's time in office.
Although the economy remains robust, prices have jumped since 2021 and inflation remains high. This could make tariff-induced price increases more significant and painful this time around.
A recent analysis by the Peterson Institute of International Economics found that a typical middle-income household would see an additional spending of about $1,700 per year if Trump imposed 10 percent tariffs on all goods and 60 percent tariffs on China.
Another analysis by the right-leaning American Action Forum estimates that a 10 percent tariff could increase the annual cost of goods to an American household by as much as $2,350. A 60 percent tariff on China would increase the cost to American households by another $1,950.
The burden of these tariffs would hit poorer households harder because they spend a larger share of their income on everyday products.
Given that voters' concerns about inflation are at the forefront, this decision could ultimately turn against Trump.
While standing in line to attend Trump's rally in Philadelphia on Saturday, Paul Rozick, an appliance warehouse manager from Bensalem, Pennsylvania, said his pay raises were not covered by high food and gasoline prices.
“Inflation is going up about 20 percent, but our salaries are going up about 2 percent,” Rozick said. “I have less money in the bank because I spend more money when I leave the house.”