The feasibility of balancing the books under a Trump presidency is uncertain, especially regarding his proposed tariff policies. Since initially suggesting this idea in June, Trump has not revisited it publicly, nor has it been included in his recently unveiled campaign platform.
A report from the White House underscores potential repercussions of a significant tariff increase, such as retaliatory measures from trading partners. Such responses could necessitate government spending to support impacted industries. This scenario mirrors events from Trump’s first term when retaliatory tariffs from China led to billions in assistance for American farmers losing market access.
The report warns that increased tariffs would likely alter consumption and production trends. Essentially, higher tariffs are expected to elevate prices on imported goods, diminishing demand, which in turn could reduce imports and lower anticipated tariff revenues.
Experts like Libby Cantrill, head of U.S. public policy at PIMCO, suggest that implementing Trump’s vision would require tariffs exceeding 100%. She argues that abolishing the federal tax code and imposing such tariffs is improbable. Similarly, the Tax Foundation labeled Trump’s proposal as “completely unrealistic.”
Moreover, the White House report addresses broader economic consequences, highlighting the potential for stunted economic growth and the shifting of tax burdens onto lower-income individuals. In contrast, it defends President Biden’s approach of targeted tariffs, asserting that they serve U.S. interests without causing major economic disruptions.
Biden has largely maintained Trump-era tariffs while introducing additional measures tailored to specific industries, such as new regulations on North American steel and aluminum, alongside efforts to prevent tariff evasion in collaboration with Mexico.
Despite the findings, Trump continues to champion tariffs as a key aspect of his campaign, pledging to implement a 60% tariff on China and 10% on other imports. At a recent rally, Trump claimed, “China paid us hundreds of billions of dollars,” inaccurately representing the nature of tariff payments, yet asserting that these actions stemmed from a renewed respect for the U.S.
