Trump tariffs could worsen rather than tame inflation

The debilitating inflation plaguing the Biden-Harris administration helped secure Donald Trump’s improbable return to the White House.

Since President Joe Biden took office, prices have increased on average by over 21 percent, and voters have rightly become sick of this pain. The majority put more faith in Trump than Vice President Kamala Harris on the economy, and as such, ushered Trump back into power.

While he has laid out an agenda that focuses on settling scores and culture wars, Trump also produced plans to cut taxes, reduce regulatory red tape and impose tariffs. Reducing taxes and regulations will certainly be a boon to Americans, at least in the short-term. However, tariffs—a tax on internationally traded goods—promise to hamper his goal of tackling inflation and improving the economy.

This isn’t Trump’s first foray into tariffs. He made them central to his first term, and Biden kept many in place—even increasing some. Following his re-election, Trump plans to levy even steeper tariffs. “He has proposed a 60 percent tariff on goods from China—and a tariff of [10] to 20 percent on everything else the United States imports,” the Associated Press reported. A blanket tariff would be applied across the board—even on America’s closest allies—according to this plan.

It seems that Trump has the power to do this unilaterally via executive order—thanks to a years-long erosion of congressional power—but he ought to be careful wielding this authority. While economists can make a case for tariffs—retaliatory or otherwise against America’s enemies in specific cases—universal tariffs are nothing more than burdensome taxes on Americans that will increase the cost of goods even further.

Proponents of tariffs often disagree and claim that they aren’t taxes on Americans, but they are doubtlessly the ones who ultimately pay it. “The business buying goods from another country pays the [tariff], but many experts agree the extra costs get passed onto consumers,” wrote USA Today. The impacts would be wide-ranging too.

“The United States is the world’s second-biggest importer. In 2022, the main imports were consumer goods (27 percent), capital goods (26 percent), and industrial supplies (25 percent) followed by automotive vehicles, parts and engines (12 percent), and foods, feeds and beverages (6 percent),” according to Trading Economics. The average tariff currently sits at around 3 percent, but if it were to go up to 10 or 20 percent, then prices would surge.

“We estimate a 10 percent universal tariff would raise $2 trillion and a 20 percent universal tariff would raise $3.3 trillion from 2025 through 2034, before factoring in how the taxes would shrink the US economy,” the Tax Foundation found. “In 2025, a 10 percent universal tariff would increase taxes on US households by $1,253 on average and a 20 percent universal tariff would increase taxes on US households by $2,045 on average.” Prices could increase even more so when other countries reciprocate with their own tariffs. This is the last thing we need when the country is grappling with surging prices.

This will also curtail macroeconomic output. The Tax Foundation estimated that a 10 percent baseline tariff and a 60 percent tariff on China could reduce GDP by .8 percent, but when including retaliatory tariffs, GDP would shrink by around 1.2 percent. That’s a considerable reduction, which will hurt employment rates, the stock market, competition, etc. This isn’t some half-baked theory either.

While Trump’s first term was marked by economic growth—except for the COVID-19 year—that growth was stymied by his first tranche of tariffs. It is hard to determine by how much exactly, but estimates range from around 0.2 percent to 0.7 percent. The impact, however, was muted by broader economic growth, but this time might be different.

If Trump wants to put the country on even stronger economic footing, then he needs to act with surgical precision. Using the metaphorical scalpel, rather than a sledge hammer, approach could reward valued trading partners and allies and safeguard Americans from rising prices, while targeting perceived enemies. Trump’s current plan does the opposite. It treats everyone as an adversary, which will ultimately raise prices on American families already struggling with high costs.

If Trump wants a successful term, then he should remember why—in part—Americans re-elected him: to tame—not perpetuate—rising prices.