Upon former President Donald Trump winning the 2024 U.S. presidential election, there has been a lot of speculation surrounding his economic plans for the nation. With 81 percent of registered voters saying the state of the economy was an important issue when casting their vote; both parties ran on campaign promises directed towards tackling inflation, significantly cutting down taxes, and plans to improve the economy overall.
At the forefront of both Trump’s foreign and economic campaign promises is the implementation of a 10-20 percent tariff on imports across all countries as well as a 60 percent import on goods coming from China. This precedes statements made at a rally in Pennsylvania addressing Europe’s failure to continually buy American goods. Former President Trump ensured Europe would “pay a big price” through the 10 percent tariff as they are not purchasing a wide variety of products and services. The idealized result: American consumers would be forced to buy domestically and companies around the world would have to choose between experiencing an unspecified loss in profit or moving their business to the U.S.. Economists are skeptical of its aims to enforce and promote domestic production as the 10 percent tariff may not outweigh the high cost of labor production in the United States.
In an attempt to incentivize companies to produce domestically, Trump also overlooks the cost to be paid by American consumers. As tariffs are put on imports coming into the U.S., the Importer of Record (IOR) will partially pass down the cost they have to pay by increasing the sales price of the product. The tax on the consumer price does not directly reflect the tariff (e.g. 10 percent tariff does not equal a 10 percent price rise), regardless, the tax burden will be aimed at low-income and middle class Americans. It is reported that the average U.S. household will pay more than $2,600 a year with Trump's 20 percent blanket tariff and 60 percent tariff on China. In an interview with TIME Trump defended his tariff plan, saying,
“I also don’t believe that the costs will go up that much. And a lot of people say, “Oh, that’s gonna be a tax on us.” I don’t believe that. I think it’s a tax on the country that’s doing it.”
Global economists have since predicted the harrowing effects the tariff would have on global supply chains, including the decline in value of foreign currencies, increase in costs, and direct retaliation from allies and adversaries alike. The further protectionist and “America-first” stance on trade policy will be inflationary and Goldman Sachs predicts it will consequently result in a 3-10% decrease in the value of the euro.
“We’ve lost our critical manufacturing industries to Mexico, to China” J.D. Vance said in defence of the tariffs. The Trump-Vance administration is working hard to standardize the tariffs and push for their long-term implementation.
Current president Joe Biden kept and expanded on virtually all of the tariffs Trump imposed on China during his first presidency. These existing tariffs have resulted in a $79 billion annual tax increase on Americans. It is estimated that these tariffs will ultimately lead to a 0.2 percent reduction in America's GDP as well as a loss in 142,000 full-time equivalent jobs (ibid).
As Trump inauguration will take place on January 20, 2025, there is still a lot of ambiguity surrounding the specifics of his campaign promises and the timeline for their implementation.
Comments