On his Truth social site Monday evening, Trump unveiled plans to impose a 25 percent tariff on all imports from Mexico and Canada. January 20, its opening day. The president-elect also said he plans to impose an additional 10 percent tariff on all imports from China.
Trump’s penchant for protectionist trade policies is a concern for many economists and Wall Street analysts, who worry that new tariffs and retaliatory measures from U.S. trading partners could slow economic growth, inflation. Could raise inflation and trigger a trade war.
But Trump and his allies, including his pick for Treasury secretary, Scott Besant, have argued that the tariffs imposed during his first term did not stimulate inflation and that the upside may be far greater than any downside.
“But if you look at it, tariffs are two things,” Trump said said In an October interview with Bloomberg News editor-in-chief John McLeathwaite. “No. 1 is to protect the companies that we have here, and the new companies that will move in because we have thousands of companies coming to this country.”
Here are four ways Trump says tariffs will help America, along with what experts say.
Protect American manufacturing.
Trump believes that imposing tariffs on trading partners will help protect American businesses at a time when domestic manufacturing jobs are far from their peak in 1979.
In some instances, the tariffs Trump imposed in 2018-19 achieved that goal, according to the Brookings Institution. to note There is some evidence that employment has increased in certain industries. For example, tariffs on imported washing machines have created 1,800 new U.S. jobs at Whirlpool and other manufacturers, according to a centrist think tank.
But that ignores the broader impact of Trump’s first-term tariffs on U.S. manufacturing along with the Federal Reserve. to search that American manufacturers faced higher prices for their imported raw materials as well as retaliatory tariffs from other nations. The number of U.S. manufacturing jobs fell slightly during Trump’s first term, from about 12.4 million to 12.2 million workers, though several factors may have contributed to the decline.
“[O]Your results suggest that tariffs have not boosted manufacturing employment or output, even though they have increased producer prices,” the Fed researchers noted.
Bring new companies to America.
Trump also claimed that broad-based tariffs would convince some foreign manufacturers to open plants in the US to avoid import duties.
“The higher the tariff, the more likely the company will come to the United States and build a factory in the United States, so it doesn’t have to pay the tariff,” Trump told Bloomberg’s McLeathwaite. Told K McLeathwaite.
While such a shift is possible, Micklethwait said such changes “will take many, many years.” (Trump disputed that, saying companies would “come quickly.”) Experts note that many factors outside of tariffs affect where companies decide to operate, including supply chains, taxes, shipping costs, etc. , and labor and regulatory policies.
Already, some businesses are anticipating the effects of the tariffs by shifting their manufacturing locations, but this is not guaranteed to benefit the U.S. For example, shoemaker Steve Madden said If Trump imposes new tariffs on Chinese imports, it will shift manufacturing away from China to countries like Cambodia and Vietnam.
Providing billions in new federal revenues
Trump has also touted the tariffs as a way to generate new federal revenue that could offset his proposed tax cuts. During his first administration, his tariffs—more restrictive than his current proposals—raised $80 billion in revenue, According to To Tax Foundation.
If Trump imposes a 10% tariff on all imports, as he proposed during his campaign, the federal government would receive $2 trillion from 2025 to 2034. Estimation The Nonpartisan Tax Foundation, a think tank focused on tax issues.
According to Goldman Sachs, a 25% tariff on Canada and Mexico, along with a 10% tax on Chinese imports, would generate less than $300 billion in tariff revenue per year alone. Overall, 43% of US imports come from Mexico (15.4%), Canada (13.6%), and China (13.9%).
However, experts say most of that revenue will be paid by American consumers and businesses. That’s because tariffs are not paid by countries that export to the U.S., as Trump maintains, but by U.S. importers.
In other words, companies like Walmart will face the decision of whether to absorb the higher cost of imports, or pass it on to consumers, Vicki Redwood, senior economist at Capital Economics, wrote in a research note.
“If costs are passed on, consumers face a choice: continue to buy imports (now more expensive) or switch to buying domestic alternatives (which will cost more than imports pre-tariff),” he noted. What did
As of August 1, Trump’s tariffs could cost the average American family an extra $2,600 a year as importers and manufacturers pass on the cost of the tariffs to consumers. Analysis from the Peterson Institute for International Economics, a nonpartisan think tank focused on economic issues;
Stop the flow of drugs and illegal immigration.
Trump also sees the threat of new tariffs as a way to curb illegal immigration and drug trafficking, citing people “coming through Mexico and Canada, crime and drugs at this level.” but brings the never-before-seen.” The tariffs will stay until drugs, especially fentanyl, and all illegal aliens stop this invasion of our country! He added.
Most fentanyl within the US Smuggled from Mexico.. During President Biden’s term, border drug seizures Rose quicklyUS authorities seized about 21,900 pounds (12,247 kilograms) of fentanyl in the 2024 government budget year, compared with 2,545 pounds (1,154 kilograms) in 2019, when Trump was president.
While it’s possible that Canada, Mexico and China could increase enforcement against drug trafficking or immigration to avoid Trump’s tariffs, it’s unclear whether such a threat would achieve those goals. Mexican President Claudia Sheinbaum suggested on Tuesday that Mexico could retaliate with tariffs of its own and called illegal drugs an American problem, signaling a willingness to discuss those issues with Trump.
He said the flow of drugs into the United States is “a public health and consumption problem in your country’s society.”