Trump’s Plan to Supercharge InflationBy Ronald Brownstein. The Atlantic, June 2, 2024- Among prominent economists, no one was more explicit than former Treasury Secretary Larry Summers in warning that President Joe Biden and the Federal Reserve Board risked igniting inflation by overstimulating the economy in 2021. Soaring prices over the next few years proved Summers correct.
Now Summers sees the risk of another price shock in the economic plans of former President Donald Trump. “There has never been a presidential platform so self-evidently inflationary as the one put forward by President Trump,” Summers told me in an interview this week. “I have little doubt that with the Trump program, we will see a substantial acceleration in inflation, unless somehow we get a major recession first.” ...
Summers is far from alone in raising that alarm. Trump’s greatest asset in the 2024 campaign may be the widespread belief among voters that the cost of living was more affordable when he was president and would be so again if he’s reelected to a second term. But a growing number of economists and policy analysts are warning that Trump’s second-term agenda of sweeping tariffs, mass deportation of undocumented migrants, and enormous tax cuts would accelerate, rather than alleviate, inflation. ... These new levies go far beyond any of the tariffs Trump raised while in office
... For many economists, Trump’s plans to impose 10 percent tariffs on imported products from all countries and 60 percent tariffs on imports from China are the most concerning entries on that list. (read it all)
Trump’s $300 Billion Tax Hike Would Threaten U.S. Businesses and Consumers
By: Erica York, The Tax Foundation, August 25, 2023 - Former President Donald Trump’s proposed 10 percent tariff would raise taxes on American consumers by more than $300 billion a year—a tax increase rivaling the ones proposed by President Biden. If implemented, the significant trade tax hike would trigger retaliatory tax increases on U.S. exports.
International trade is vital to the United States. Each year, Americans as a whole purchase more goods and services than they produce. By the same token, we save less than needed to fulfill our investment opportunities. International trade bridges the gap. We purchase the additional goods and services from abroad while the rest of the world lends us the money to do so by investing in U.S. bonds and businesses.
Trump’s proposal would deliberately throw a wrench in that process. In 2022, we bought more than $3.2 trillion worth of goods from other countries; imposing a new 10 percent tax on our purchases would raise U.S. taxes by more than $300 billion. It would create what Trump describes as a “ring around the U.S. economy” to discourage foreign companies from selling to U.S. consumers under the unfounded hope of boosting domestic production.
But rather than boost domestic production, the new tax would harm the U.S. economy through various possible channels.
One is through higher prices. Higher input costs for businesses lead to reduced production, and in turn, lower wages and profits. They can also lead to higher consumer prices, which reduce the value of our incomes because we can’t afford to purchase as much.
Another is through currency appreciation. A stronger dollar would help offset the price increases for U.S. consumers, but it would make it harder for exporters to sell their goods abroad. Again, the result is lower incomes for workers and business owners.
Whatever channel the tariffs take, Americans become poorer. In turn, the actual revenue collected by the government would be less than $300 billion because other tax revenues would fall.
Using the Tax Foundation’s general equilibrium model, we estimate a new 10 percent tariff on all imports would reduce the size of the U.S. economy by 0.7 percent and eliminate 505,000 full-time equivalent jobs.
Unfortunately, that would be the tip of the iceberg. Imposing an across-the-board tariff would threaten the entire system of global trade we currently enjoy.
U.S. exports totaled $2.1 trillion in 2022. If the rest of the world responded to the new tariff in kind, it would amount to $200 billion of new taxes for foreign governments. We estimate that would further reduce U.S. GDP by 0.4 percent and eliminate another 322,000 full-time equivalent jobs.
Taken together, we find Trump’s proposal of a 10 percent trade tax matched with in-kind retaliation would shrink the U.S. economy by 1.1 percent and threaten more than 825,000 U.S. jobs.
Indiana University economist Ahmad Lashkaripour estimates a global tariff war would, on average, shrink a country’s GDP by 2.8 percent—he finds the United States would experience a GDP drop of 1.1 percent, while smaller countries more dependent on imports would experience much harsher declines.
We know from decades of experience and evidence that tariffs reduce employment, productivity, and output. The past five years have demonstrated that reality all too well.
During his term, Trump imposed nearly $80 billion of tariffs on steel, aluminum, solar panels, washing machines, and thousands of products from China. President Biden has largely maintained them. The result? They have eliminated U.S. manufacturing jobs, harmed U.S. farmers, raised prices for U.S. consumers, and alienated our allies—all without changing China’s unfair trade policies or reviving protected domestic industries.
It appears the lesson has not been learned. Policymakers should embrace the system whereby U.S. producers can sell their goods and services to consumers across the world and U.S. consumers can access an abundant variety of goods and services produced across the world. Trump’s trade tax proposal threatens to upend this system—and we would all be poorer as a result. (
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Rod's Comment, Sept. 18, 2024
Please note that since the above two articles were originally published, Trump has said he would raise across the board tariffs by a whopping 20%! It this should happen this would lead to massive inflation, unless of course it leads to a worldwide depression and economic collapse. No one should think for a minute that if we raise tariffs, other countries will not retaliate.
I never thought I would see a time in which a Republican candidate for president would have a worse economic policy than a Democrat, but we are seeing it. Kamala Harris has some very bad policy proposals, but Trump's trump Harris. Harris' policies may be bad; Trump's economic policies would be a disaster.
I have posted above only two such articles explaining why Trump's tariff proposal would be detrimental. Economist after economist agree Trump's tariff proposals would be a disaster.
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