By Lance Simmens
Presidential candidate Donald Trump has offered proposals to impose tariffs upon foreign nations anywhere from 10 percent to 200 percent in order to entice manufacturing production to locate in the United States, and it has sparked a loud response that could effectively push our economy into an economic recession. According to the Tax Foundation, who published a report recently entitled “Tariff Tracker: Tracking the Economic Impact of the Trump-Biden Tariffs,” the Trump administration imposed nearly $80 billion worth of new taxes by levying tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest tax increases in decades:
“The Biden administration has kept most of the tariffs in place and in May of this year announced tariff hikes on an additional $18 billion of Chinese goods, including semiconductors and electric vehicles, for an additional increase of $3.6 billion … altogether, the trade war policies currently in place add up to $79 billion in tariff on trade levels at the time of tariff implementation.
“As of March 2024, the trade war tariffs have generated more than $233 billion of higher taxes collected for the U.S. government from U.S. consumers. Of that total, $89 billion, or about 38 percent, was collected during the Trump administration, while the remaining $144 billion, or about 62 percent, has been collected during the Biden administration.”
It is no secret that tariffs raise prices and reduce economic growth. Economists generally agree free trade increases the level of economic output and income, while, conversely, trade barriers reduce economic output and income. Trump recently floated the idea on CNN of between a 100 percent to 200 percent tariff on cars made in Mexico, adding “if you don’t make your product here, then you will have to pay a tariff, a very substantial tariff, when you send your product into the United States.”
Despite Trump’s love affair with the notion of increased tariffs, studies by the Tax Foundation and the US-China Business Council, have concluded that Trump’s tariffs hurt the U.S. economy and resulted in a net loss of jobs.
A recent report by the Committee for a Responsible Federal Budget (CRFB) casts a more sober light on the budgetary forces currently posing before whomever finds themselves in the White House next year. The report outlines proposals by the respective presidential campaigns that concludes neither has a plan that would “at best maintain the status quo and, at worst, add tremendously to our debt and deficits. Neither has a plan to fix the imbalances in the major trust funds.”
“Vice President Kamala Harris has put forward a campaign plan that, if implemented, could add $3.50 trillion to our national debt, sending it to 133 percent of GDP by the end of FY 2035,” the report continues. “Meanwhile, former President Donald Trump has put forward a campaign plan that could add $7.50 trillion to the debt, sending it to 142 percent of GDP by the end of 2035 … While it’s plausible that the Harris plan could be roughly budget neutrality it is also plausible that her plan could add $8.10 trillion to the debt. The Trump plan could add $1.45 trillion to the debt but could also add as much as $15.15 trillion.”
As if this were not alarming in and of itself, regardless of who wins the White House, the new president will be confronted with a seemingly endless budgetary dilemma, one that will surely test their deepest desires to make decisions that are unavoidable.
“Whoever wins the 2024 presidential election will face an unprecedented fiscal situation upon taking office,” the CFRB report says. “The national debt is projected to reach a new record high as a share of the economy only three years from now, well within the next presidential term. Already, the cost of servicing our high and rising national debt has eclipsed the cost of defending our nation or providing health care to elderly Americans. Three important trust fund programs are on track to become insolvent within the next 12 years, putting Americans’ retirement and health care at risk and limiting our ability to continue update our aging infrastructure …In the first year of their term, the next president will also face the return of the debt limit, the expiration of the Fiscal Responsibility Act spending caps, and the expiration of several tax and spending provisions that would prove extremely costly to extend.”
As we continue to struggle with a split and diversified political support system, the extent to which we must learn to agree amongst ourselves that decorum and serious negotiation will be absolutely necessary for the benefit of our future generations is critically important. Foolish games of gotcha will result in endless deadlock and a lack of responsibility. We must exercise a devotion to those who will inherit what we have left them.