Former President Donald Trump has proposed a 10 percent tariff on all imports to the United States. The two presumptive goals of the tax on foreign goods are lower tariffs on American exports and a lower trade deficit. A new analysis from National Taxpayers Union (NTU) finds that imposing the tariffs would have the opposite effect.
Instead of causing other trade partners to lower their taxes on American goods, NTU warns that, if enacted, the new tariffs could backfire, leading to increased tariffs on American goods and an export reduction of nearly 20 percent.
The last time President Trump tried to impose additional taxes on imports instead of opening markets for exporters, American businesses were met with retaliatory tariffs overseas. On the other hand, when the United States negotiated trade deals like the North American Free Trade Agreement (NAFTA) and led the creation of the World Trade Organization, foreign tariffs fell from 13.4 percent in 1994 to 5.5 percent in 2009.
The largest U.S. export market, the European Union (EU), is already drafting its plan to react. Studies suggest that American companies could suffer $391.9 billion in lost exports if other nations retaliate.
The analysis also shows that increasing tariffs on imports would not lower the trade deficit because American exports would decrease significantly.
Bryan Riley, Director of NTU’s Free Trade Initiative, writes:
The new tariffs would represent a major tax hike for American businesses and families and weaken U.S. security ties while boosting China’s influence in Latin America and elsewhere. Should he regain the White House, President Trump should avoid imposing tariffs that would inevitably boomerang on the U.S. economy.
If you would like to speak with the Director of NTU’s Free Trade Initiative, Bryan Riley, about the costs of tariffs to American taxpayers, please contact NTU Communications Manager Courtney Manley at ntu@ntu.org.