Sunday, Oct. 27, 2024 | 2 a.m.
Donald Trump touts tariffs as the ultimate tool to replace revenue lost from trillions in promised tax cuts, protect American industries and punish foreign countries that allegedly “take advantage” of the U.S. Yet, a closer look reveals a disturbing truth: Tariffs open the door to significant corruption and can result in harm to the U.S. economy.
Not all tariffs are bad. Defensive tariffs that are imposed in response to specific abuse by other countries have a long and justifiable history. However, those tariffs also have specific goals that, once achieved, allow the tariff to end.
Trump’s current generalized tariff language is very different.
Tariffs, by their nature, confer enormous power to those who wield them. Since Congress relinquished most of its control in 1962, the president can impose or lift these taxes on imported goods with minimal oversight. This essentially unilateral control provides fertile ground for corruption.
During Trump’s term in office, he wielded tariffs like a blunt instrument, frequently invoking them to achieve political goals, reward allies and punish adversaries.
For example, when Trump imposed tariffs on steel and aluminum in 2018 under the guise of national security, members of Congress presented evidence that Trump administration officials were more likely to grant exemptions to companies with connections to the Trump family. The notable exemptions included a sanctioned Russian metals company with ties to Russian President Vladimir Putin.
This type of corruption is not new. Tariffs have long been used as tools for consolidating power and engaging in cronyism.
Autocratic leaders like Putin and Chinese President Xi Jinping have long used trade policy to reward friends, punish foes, consolidate power and silence dissent and disobedience. This is exactly where Trump is heading. Industry has taken note and many leaders, such as Elon Musk, appear eager to bend the knee to Trump to get the same kind of corrupt gifts that Putin gave his obedient oligarchs.
The Supreme Court’s reluctance to limit the president’s authority in this domain has effectively given Trump the green light to manipulate tariffs for personal or political gain. It is not hard to imagine tariffs being used to extract favors, reward donors, punish critics or even demand bribes — undermining the principles of fair governance.
While the corruption risks associated with tariffs are deeply concerning, the economic consequences are equally problematic. Trump’s plan for a “universal baseline tariff” on all imported goods is a particularly harmful proposal. The sweeping policy would amount to an across-the-board tax increase on all consumers and businesses, leading to higher prices, reduced consumer choice and economic inefficiency. The basic economics of tariffs are well understood: when the government imposes taxes on imports, it raises the cost of goods for consumers and increases input costs for businesses that rely on foreign materials, which would severely damage U.S. manufacturing.
Furthermore, Trump’s tariffs are unlikely to achieve their stated goal of reviving American manufacturing. The last time tariffs were imposed at a similar scope or scale to those proposed by Trump, it was the 1930 Smoot-Hawley Tariff Act which economists from across the political spectrum agree severely exacerbated the Great Depression.
The global response to Trump’s tariffs during his presidency should serve as a cautionary tale. When Trump imposed tariffs on steel and aluminum in 2018, other countries swiftly retaliated with tariffs on American goods, targeting politically significant industries such as agriculture. Huge markets like China and even allies like the European Union and Canada responded with their own tariffs, leading to a trade war that hurt American farmers, manufacturers and exporters.
A May 2019 analysis conducted by CNBC found Trump’s tariffs were equivalent to a $72 billion tax increase on the American people. Studies have shown that Trump’s tariffs also reduced real income in the United States and adversely affected U.S. GDP, meaning the country as a whole became less wealthy.
The agricultural sector was particularly hard hit, leading the Trump administration to provide billions of dollars in subsidies to affected farmers — a temporary and costly solution that only underscored the failure of the initial tariff policy.
The tariffs of Trump’s first term were tiny compared with what he’s now pledging to enforce. The proposed universal tariff would likely provoke a similar round of retaliatory measures but would target all imports, increasing the risk of a global economic conflict that could destabilize the world economy. Nations around the world would feel compelled to unite in a trade war against the U.S., potentially leading the dollar to lose its status as the world’s trusted currency, something which benefits the U.S. and its citizens in myriad ways.
Already the so-called BRICS nations (Brazil, Russia, China, India, South Africa, recently joined by Iran and Saudi Arabia) are actively working to replace the dollar as the world’s currency and thus weaken the U.S. Putin knows there is no faster way of destroying America’s international dominance and is almost certainly urging Trump to pursue these tariffs. Our enemies are giddy at the prospect of a Trump presidency — they know how weak, simple-minded and gullible he is.
There is also this: Trump is proposing the tariffs as a method to pay for his trillions in proposed tax cuts. However, the past 100 years have proven that trade wars don’t last more than a few years before everyone backs down because of the damage done. That means that once we start dropping tariffs, there will be no revenue to pay for the tax cuts and the nation’s fiscal cliff gets even worse. In the interim, the dollar could be replaced, U.S. industry plunged into chaos and a deep recession firmly entrenched.
Tariffs are like playing chicken with the economy. No one wins. Except for Trump, who would enrich himself and his friends, and quite likely try to consolidate domestic power via an oligarchy a la Putin.
The danger is clear: Trump’s proposed tariffs threaten to open the door to a system where trade policy serves not the common good but the interests of a small few. The harm would reverberate across the country, hitting consumers, businesses and workers alike. America cannot afford to return to the trade policies of centuries past, where protectionism and cronyism reigned. It’s time to say no to tariffs that will make America less competitive, less fair and less prosperous, which means saying no to Trump.