An Overview of Trump's Tariffs
By Saanvi Nagaraj
With the 2024 election results revealing that Donald J. Trump will be the next president of the United States, the economic term tariff has become increasingly relevant. Trump has emphasized that his economic plan for the next four years will involve tariffs, calling himself the “tariff man.”
So what exactly are they? According to the Merriam-Webster dictionary, a tariff is “a schedule of duties imposed by a government on imported or, in some countries, exported goods.” In other words, when someone wants to bring goods into one country from another, they have to pay a fee. The rationale behind this is that it will encourage people to buy products made domestically and, therefore, support the domestic economy. This is also a form of economic protectionism as it tries to protect the domestic economy by creating a disadvantage for any foreign competitors.
Pro-tariff advocates argue that tariffs would increase domestic manufacturing, making supply chains more resilient and creating more jobs. They also place greater importance on manufacturing in the US. It would also keep money inside of the US, reducing federal debt and the need for more borrowing. Opponents say that tariffs would not decrease the amount of goods being imported, as businesses would just adjust for the added cost of the tariff by increasing the market price and offloading the cost to the average consumer; the company AutoZone states that they plan to use this strategy.
Historically, the Smoot-Hawley Tariff Act passed in 1930, which was the last legislation passed by the US Congress that set tariff rates, strained the economy even more during the great depression, and there are considerable similarities between the tariff plan that Trump proposes in 2024 and the Smoot-Hawley Tariff Act. The 1930 bill raised the average tariff to 40 percent, and Trump plans to raise it by 10-20% for imports and 40-60% for imports from China. The act was opposed by economists, with 1,000 economists signing a petition to President Hoover asking him to veto the bill. Many economic organizations have done the same for Trump’s plans, like the Peterson Institute for International Economics and 23 Nobel-winning economists. According to AP, the 23 economists stated that a Trump Administration “will lead to higher prices, larger deficits, and greater inequality.” While the Smoot-Hawley Tariff Act is an extreme example of the impact of tariffs, it must be kept in mind as it was the last legislation passed by the US Congress that set tariff rates, setting a historical precedent.
Whether or not Trump's proposed tariffs actually come into effect, the finer details of what exactly those effects are can only be determined by time, but the return to tariffs will continue.
Sources:
Economists Aren’t Telling the Whole Truth About Tariffs - The Atlantic
Tariff Definition & Meaning - Merriam-Webster
Trump Tariff Plan Explained: Expect High Drama and a Slow Rollout - Bloomberg
Trump pledged sweeping tariffs. We don’t know what they will do. - The Washington Post
Smoot-Hawley Tariff Act | History, Effects, & Facts | Britannica
Smoot-Hawley Tariff Act: A Classic Economics Horror Story : NPR
Europe could try to stop — or get around — damaging Trump tariffs
3 companies preparing to raise prices if Trump's trade plan is enacted
Frustrated Americans await the economic changes they voted for with Trump | AP News
Europe Braces for Trump: ‘Worst Economic Nightmare Has Come True’ - The New York Times