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It’s Tuesday, the traditional day for elections and for our pause-and-consider newsletter on politics and policy. We think of it as a mini-magazine in your inbox.
TARIFFS: THE U.S. VERSUS CHINA AND BIDEN VERSUS TRUMP
By Lisa Desjardins, @LisaDNews
Correspondent
Oh how far tariffs have come.
In the 19th century, they sparked a supernova economic debate that fed tensions into the Civil War. By the 20th century, tariffs became clear political villains after the Smoot-Hawley tariffs were blamed (accurately or not) for sparking the Great Depression. They were mocked more than 50 years later as an infamous and boring failure.
But, wow, are they back.
Today, President Joe Biden announced steep, targeted tariffs on a range of Chinese products, as well as the extension of tariffs put in place by former President Donald Trump.
The stakes are high for these kinds of decisions: U.S. jobs, inflation and nothing less than the global economic system may be affected going forward.
Let’s lay out what is happening and what it may mean.
Biden’s key tariffs in 2024
- Electric vehicles: 100 percent
- Solar cells: 50 percent
- Steel and aluminum: 25 percent
- Lithium-ion batteries: 25 percent
- Computer chips (semiconductors): 50 percent
- Graphite and other critical minerals: 25 percent
Trump’s key tariffs in 2018
- Washing machines and parts: 20 to 50 percent. These expired in 2023.
- Solar cells: 30 percent initially, to phase down to 15 percent.
- Steel: 25 percent
- Aluminum: 10 percent
- Miscellaneous consumer goods, including hats and clothing: 25 percent
Now let’s turn to key questions.
Did Biden keep most of the Trump tariffs?
For China? Broadly, yes, other than the washing machine tariffs. Biden’s approach was different for Europe, though. He retooled the steel and aluminum tariffs for the European Union in December, suspending them until at least 2025.
What effect did the Trump tariffs have?
This is highly debated. (See the 19th century, the 20th century and history repeating itself.)
There are plenty of groups on the right, especially free-trade groups, that argue that Trump’s tariffs increased costs for supply-dependent businesses and consumers. And yet there are plenty of industry groups that say there were economic benefits.
Let’s take washing machines as an example. The conservative Heritage Foundation railed against those tariffs, arguing there was a direct 12-percent increase in the cost of washing machines for American consumers while that tariff was active. But some trade experts argued that the Trump tariff revitalized the dying American washer industry and created a few thousand jobs.
OK, but overall, what did the Trump tariffs do?
There were myriad effects that are still being evaluated.
A 2023 report from the U.S. International Trade Commission (USITC) found:
- American steel benefitted. Imports went down, domestic production ultimately was higher and capacity hit a 14-year record.
- At the same time, the price of steel increased at a much higher rate in the United States. That was good for the steel industry, but added to price pressure for products downstream. The USITC concluded that “For downstream industries, the effects are largely negative but differ in magnitude.”
- For the other products Trump tariffed, the agency had similar conclusions: Prices went up for consumers, but if they were buying things produced in the U.S., the increase was not large – about 3 to 4 percent. At the same time, the value of U.S. production increased.
Other studies found that the tariffs, overall, hurt Americans financially:
- Loss of jobs. A working paper from the National Bureau of Economic Research pointed to job losses from the Trump tariffs. They had a loss of 245,000 jobs at the zenith of their effect, a 2021 study commissioned by the pro-China-trade U.S.-China Business Council found. And the independent Tax Foundation concluded in 2023 there was a long-term net loss of 166,000 jobs from the tariffs.
- Loss of income. There was an overall “reduction in U.S. real income of $1.4 billion per month by the end of 2018,” according to a National Bureau of Economic Research (NBER) study published in 2019.
Yet Trump’s policies were popular in the U.S., the NBER paper added. As The New York Times put it, those “aggressive tariffs on foreign products were a political success for Mr. Trump and the Republican Party.”
What does candidate Trump want to do now?
The former president has not put out a specific policy paper on his proposals, but has said clearly in his speeches that he is considering at least a 10 percent tariff on all imports from all countries, as well as up to 60 percent tariffs on goods from China. Trump said in a Saturday campaign speech in New Jersey that he’d put “a 200 percent tax on every car that comes in from those plants,” referring to Chinese vehicles from Mexico.
It is not clear whether Trump, as president, would have the ability to levy such far-reaching tariffs on his own.
Such a sweeping plan would invite both hard-to-predict and also widely disruptive effects, some financial experts and right-leaning think tanks have warned. Analyses from unconnected groups — some nonpartisan and some with a left-ideological lean — conclude that the idea would likely reduce economic growth in the U.S.
We found one group focused on domestic businesses and agriculture that found the policy could trigger growth. That is the minority view at the moment.
Why is this important?
The protectionist shift by presidential nominees of both parties — the current and former presidents — underscore an isolationist mood in the United States.
It also is driven by the rise of China and China’s economy.
At the same time, these current conditions ride in parallel to a long history of U.S. steps and missteps in trade.
Tariffs reward some winners. But they also mean significant losses. We’ll be thinking about this more – to try to pinpoint, if possible, who benefits and who gets hurt from both candidates’ plans.
For now, it felt time to mark this piece of economic history poised to repeat itself, in slightly different form.
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