Republican presidential candidate Donald Trump has proposed getting tough with China, Japan and Mexico by slapping tariffs on products from those countries that are imported into the United States.
His goal is to get American companies to produce those products domestically, which would provide jobs for Americans currently seeking better income.
If only it were as easy as flipping on the light switch to illuminate a room.
The nonpartisan research group, the National Foundation for American Policy, analyzed Trump’s plan to ascertain its impact on American consumers.
Like most such plans, if you’re already earning a substantial salary, you could probably absorb the economic disruption of such a transition. But the proposed tariffs had increasingly harsher impact on purchasers in the middle and especially the lower income ranges.
The group estimated that the average U.S. household would spend an extra $6,000 per year if the tariffs were applied to the three countries per Trump’s plan.
“We find that a Trump tariff proposal against all countries would cost U.S. consumers $459 billion annually and $2.29 trillion over five years, “ said David Tuerck and Paul Bachman, two economist from Suffolk University in Boston. “Our analysis finds that the Trump tariffs would manifest themselves as a 30.5 percent increase in the price of competing domestic producer goods and therefore, as a cut in real wages.”
The economists ran two scenarios. The first model applied a 45 percent tariff on imports from China and Japan and a 35 percent tariff on imports from Mexico. That increased costs for the average American household by more than $2,200 per year.
The second scenario, which applied a 45 percent tariff on imports from all countries, produced the harshest results. “Then the results would be truly catastrophic for the poor,” their report said. “It would be as if the United States imposed a new tax of 53 percent on the lowest 10 percent income decile and a 20 percent tax on the next lowest decile. It would be the equivalent to an 11 percent flat tax on the after-tax income of U.S. workers.”
If those countries retaliated with their own tariffs, which has historical precedent, the impact on the overall economy would be much worse.
Recently, Trump has said his campaign statements are primarily starting points for negotiations, so it remains to be seen how his rhetoric might be revised.