Former President Donald Trump has once again placed tariffs at the forefront of his economic agenda as he campaigns for the White House in 2024. Trump has proposed imposing sweeping tariffs on all imports, with a 10-20% tariff on every product coming into the U.S. and a staggering 60% tariff on Chinese goods. He claims that these tariffs would boost American manufacturing, create jobs, and generate revenue for various policy initiatives. However, these tariffs come with significant trade-offs, particularly for American businesses and consumers.
Here are three charts that help explain the effects of Trump’s tariff proposals:
1. Who Pays for Tariffs?
Trump has often falsely stated that foreign countries pay the tariffs. In reality, it is U.S. companies importing goods that bear the brunt of these costs. When tariffs are imposed, American importers are responsible for paying the duties, and these additional costs are typically passed on to consumers in the form of higher prices.
A study from the bipartisan U.S. International Trade Commission found that American businesses and consumers paid almost the full cost of tariffs imposed during Trump’s first term. If Trump’s proposed across-the-board tariffs are implemented, the impact on U.S. companies and consumers would be even greater than before.
2. Trump’s Past Tariff Impact vs. Proposed New Tariffs
During his presidency, Trump imposed tariffs on about $380 billion worth of imports, targeting a wide range of goods from China, such as baseball hats, TVs, and sneakers, as well as products like foreign steel and solar panels. These tariffs affected roughly 14% of U.S. imports.
Trump’s new proposal would be far more extensive, applying to 100% of imports, which would dramatically increase the economic impact. This all-encompassing tariff would cover thousands of products that Americans rely on daily, making it likely that consumers will see price increases across a wide variety of goods.
3. Tariff Revenue vs. Spending Proposals
Trump has proposed using the revenue from tariffs to fund various policy initiatives, including extending tax cuts, eliminating taxes on tips and Social Security benefits, and introducing a childcare initiative. He has even suggested that tariffs could replace federal income taxes.
However, independent estimates suggest that Trump’s proposed tariffs would not generate enough revenue to fund these initiatives. According to the Committee for a Responsible Federal Budget, even if tariffs were imposed on all imports, the revenue would fall short of covering the costs of Trump’s proposed spending. The committee estimates that Trump’s overall economic plan would add $7.5 trillion to the national debt over the next decade. By contrast, Vice President Kamala Harris’s economic proposals would add about $3.5 trillion to the debt.
Trump’s proposed tariffs may sound appealing as a way to boost domestic manufacturing and create jobs, but the economic reality is more complex. U.S. businesses and consumers would bear the costs of these tariffs, leading to higher prices and limited revenue to cover Trump’s ambitious policy goals. The trade-offs, particularly for middle-class families, could be significant, with some estimates suggesting that tariffs could raise annual costs for households by $1,350 to $3,900.
