President Trump’s “Make America Great Again” campaign promise to voters meant that he would grow the economy, increase wealth and prosperity for families, and ensure the U.S. was competitive.
For the most part he’s succeeded. In his first 18 months in office, Trump has kept his promise through a combination of pro-growth, pro-family tax reform and deregulation. The unemployment rate is at a 17-year-low, and the economy has grown by nearly 3 percent over the past year. Manufacturers have recorded record-high levels of business optimism and are planning to invest and hire more workers.
Unfortunately, the administration’s actions on trade threaten to completely undermine these gains.
In recent months, Trump has launched a global trade war by imposing tariffs on steel and aluminum totaling $34 billion on China, and just announced an additional $200 billion on Chinese goods entering the U.S. The administration has also imposed steel and aluminum tariffs on Canada, Mexico, and the EU and is threatening to impose tariffs on automobiles. Trump has even suggested putting tariffs on all imports from China – a total of $505 billion worth of products.
While the goal of these actions is to level the playing field for U.S. companies and incentivize the creation of good-paying manufacturing jobs in the United States, tariffs will have the opposite effect.
Tariffs are taxes on Americans. Higher tariffs increase the cost of products exported into the U.S., raising prices for families and for businesses that rely on imports. Tariffs also invite retaliatory tariffs making it harder for American businesses to do business overseas.
This is far from hypothetical. Significant economic harm results from tariffs, such as the recent announcements by Mid-Continent Nail Corporation and Harley-Davidson that they will lay off workers or move production offshore.
While the administration’s trade strategy is based around the argument that aggressive actions will save American jobs, the Tax Foundation predicts that 48,585 jobs have been lost from already-enacted tariffs. This is only the beginning. Tariffs not yet in effect but threatened by the Trump administration could cost an additional 277,825 American jobs.
This could not have happened at a worse time. The Trump administration’s regulatory reforms have removed substantial burdens and uncertainty for businesses. Similarly, pro-growth tax reform has been a boon to the U.S. economy, and companies have responded with pay increases, bonuses, workforce development programs, pension plan increases, and capital expenditures.
Tariffs and other barriers to trade not only threaten to wipe out much of these benefits but will also raise the cost of production in the United States and make manufacturing less competitive.
At a time of strong job growth, low unemployment, and soaring business confidence—driven in large part by a competitive territorial system of taxation and a corporate tax rate of 21 percent—the last thing we should do is put new taxes in place.
A web of tariffs will wipe out much of the benefits of tax reform and regulatory relief and make it more difficult, costly, and challenging to manufacture in the United States.
To be clear, Trump is right to be fighting for favorable trade deals. There is no doubt that China is abusing the rules when it comes to intellectual property theft, joint venture requirements, and transshipment of steel. Other countries have imposed tariffs and trade barriers that have harmed American businesses and jobs.
But imposing tariffs and engaging in an ever-escalating trade war with other countries, many of which are close allies, is the wrong way to achieve this goal.
Trade wars are civil wars. Some Americans will win, and some will lose, but there will be far more losers than winners. For example, while the Trump administration’s tariffs on steel may help the 80,000 employees of steel-producing firms, they will most certainly hurt the 900,000 workers of steel-consuming companies.
At a time that Trump’s tax cuts and deregulatory agenda are beginning to bear fruit, the wave of tariffs that the administration has proposed will only end up harming American workers and families and undercut the signature achievements of Trump.
Alex Hendrie is director of tax policy at the non-profit group Americans for Tax Reform, which advocates for limited government and lower taxes. Kip Eideberg is vice president of public affairs and advocacy at the Association of Equipment Manufacturers, which represents manufacturers, parts and service providers for the agriculture, construction, forestry, mining, and utility equipment industries.
