Trump Gets Tariffs Wrong at the Presidential Debate

Donald Trump recommitted himself to protectionism during his first presidential debate with Kamala Harris, held Tuesday night. “I took in billions and billions of dollars…from China,” Trump said of his presidency, as he pledged to levy new tariffs if elected again. The nature of Trump’s confusion surrounding trade is both economic and historical. It is both theoretical and practical. At a recent rally, the former president insisted that protection is “not going to be a cost to you” – the American people – “it’s going to be a cost to another country.”

This economic backwardness cries out for a response from the political right.  The most obvious rebuttals to protectionist proposals emanate from the very tariffs Trump placed when in office. Americans, not foreigners, paid these costs. A helpful blogpost from the Cato Institute assembles extensive research showing as much, including findings from diverse institutions from the academy to think tanks to the U.S. government. The U.S. International Trade Commission stated in a 2023 report that Americans “bore nearly the full cost of these tariffs because import prices increased at the same rate as the tariffs.” According to the Congressional Budget Office, Trump-era tariffs induced higher prices and lower output that amounted in 2020 to a cost of $1,277 per household. The Tax Foundation reports that the tariffs imposed by Trump and President Joe Biden will, on net, degrade long-run GDP, capital stock, and employment.

Moreover, despite Trump’s frequent claims, his tariffs failed to achieve their stated objectives.

Did tariffs reduce the trade deficit (which matters far less than protectionists assume)? Quite the opposite, although tariffs matter less than other factors. “In 2017, the last full year before Trump’s tariffs were imposed, America’s overall trade deficit was $517 billion,” writes Reason’s Eric Boehm “By 2023, it had grown to $785 billion, according to new Census Bureau data.” 

Did tariffs support manufacturing-sector employment? Those employed in industries that source from protected industries often outnumber those “benefitting” from protectionism (those benefits can prove illusory). Tariffs fall heavily on downstream industries; one firm’s protection is its customer’s spiking cost of inputs. Trump’s “steel and aluminum tariffs…created a few metals-producers’ jobs – 1,000 in steel and 1,300 in aluminum,” write Phil Gramm and Donald J. Boudreaux. “Using Federal Reserve data, Kadee Russ of the University of California, Davis and Lydia Cox of Harvard estimated that these tariffs destroyed about 75,000 manufacturing jobs,” the duo adds. When the fever of putatively pro-industrial protection burns hot, those 75,000 workers are forgotten.

Did tariffs boost U.S. manufacturing? Not remotely. More from Gramm and Boudreaux:

“From 2011 to 2017, manufacturing worker productivity fell at an average annual rate of 0.65%. It then grew in 2018 with the implementation of the Tax Cuts and Jobs Act. But in 2019, when the Trump tariffs were fully in effect, the productivity of manufacturing workers plummeted by 2.2%—a larger decline than in any prior year dating to 2011.

“A similar story is told by manufacturing output. Over the first three quarters of 2018 it rose by 2.5%, spurred by tax cuts and deregulation. As tariffs commenced, it quickly began to fall. By the last quarter of 2019 manufacturing output was 4.7% lower than it was in the third quarter of 2018. On the eve of the pandemic, 32,000 fewer Americans were employed in manufacturing than at the same point in the prior year.”

Did tariffs extract concessions from China? Trump touted concessions he wrestled from the Chinese – e.g., the vaunted “Phase One Agreement” of 2020. But Beijing agreed with fingers crossed behind its back. Says the U.S. Trade Representative:

“While China followed through in implementing some provisions of the Phase One Agreement, it has not yet implemented some of the more significant commitments and fell far short of implementing its commitments to purchase U.S. goods and services in 2020 and 2021. It is clear that this Agreement has not led to fundamental changes to China’s state-led, non-market trade regime and their harmful impact on the U.S. economy and U.S. workers and businesses.”

In the technical jargon of elite economists, tariffs are “all pain and no gain.” Trump’s tariff schemes failed, and Biden’s are failing. In inflation-wracked times, in which families stretch to buy gas and groceries and industry struggles under crushing inputs costs, tariffs seem antithetical to the needs of the moment. “I had tariffs, and yet I had no inflation,” Trump crowed at Tuesday’s debate. True – but only so far. While Trump did not oversee the oppressive inflation that has dogged Biden’s presidency, the prices of tariffed goods did, indeed, rise.

More fundamentally, Trump misunderstands the free market’s essence and driving forces. His logic proceeds from suppositions of zero-sum transactions. “Other countries are going to finally, after 75 years, pay us back for all that we’ve done for the world,” he said on Tuesday night. But free trade (and even less-than-free trade, often) benefits both parties – and their respective countries’ economies. This is the essence of capitalism: One person earns money by giving something of value to somebody else, after which both emerge better off.

Protectionism tends towards higher prices, contracted exports, and less wealth (see: deadweight loss), both in America and abroad. The world’s post-war journey towards freer commerce has made it – and especially its poorest regions – unfathomably wealthier.

Republicans typically champion property rights and free exchange, tax cuts, and deregulation. Tariff increases – especially of the radical kind Trump has suggested of late – contravene this agenda of freedom, which is, as every conservative should derecognize, correct in both economic and moral terms. Trump’s presidency proved that many Trumpian proclamations never complete the journey from utterance to law; but traditionally left-wing notions of protectionism and industrial policy nonetheless ought not go unrebutted by conservatives, who know better.