The incoming Trump administration is likely to impose significant tariffs on U.S. imports to an extent not seen since before World War II. The president-elect has already announced that he will use emergency executive authority on his first day in office to impose 25 percent tariffs on Canada and Mexico, the United States’ closest trading partners, and a 10 percent tariff on Chinese goods. And given that he campaigned on an across-the-board tariff and a massive China-specific tariff, this is likely just the beginning. Donald Trump may couch his tariff proposals in the language of “America first” or as fighting back against the ills of global trade, but the tariff ideas he has proposed will not make the economy fairer, bring prosperity to working people, protect the environment, or improve climate sustainability—and what’s worse, they are not even designed to do so. Yet the most common critique of Trump’s tariff agenda fails to make this point, focusing instead on the price increases likely to face American consumers instead of the negative impact Trump’s economic agenda will have on working people, the environment, and global efforts to address challenges such as climate change. More alarmingly, critiques based on price alone fall into the trap of equating sound trade policy with advancing the needs of consumers, who care only about lowering prices. If articulated poorly, such critiques can even appear to argue against tariffs in any form, which is unhelpful given the need to use tariffs to address the inequities of modern global trade and the unfair trade practices of others, as well as to reward private sector investments in decarbonization. It is the same trap that policymakers fell into through decades of deregulation, liberalized trade, and tax cuts. And it is a line of argument that plays into Trump’s political calculus, since most voters view his tariff threats as him standing up for their jobs and livelihoods, and they discount any future price increases that his tariffs may facilitate. Trump’s tariffs should be opposed not just because they increase costs for average Americans, but because they are so clearly bad for workers and the country’s long-term interests. It is telling that the incoming Trump administration seems to view tariffs as the solution to every problem: In their view, tariffs can be used to stop the flow of migrants and illegal drugs, punish China, stop countries from trading in nondollar-denominated currencies, and eliminate the income tax. Yet none of Trump’s tariff proposals are designed around the values, needs, or aspirations of working people, nor are they built for the realities of 21st-century trade, including interconnectivity, digitalization, competition from nonmarket economies, or the need to use trade as a tool in the fight against climate change. Trump’s across-the-board tariff proposal, which he first proposed as a 10 percent tariff on all imports and later suggested could increase to 20 percent, is a good example of how Trump’s tariff ideas are so counterproductive to U.S. workers and the country more broadly. First, an across-the-board tariff would tax all imports from adversaries and allies alike, making it difficult to differentiate between those exporters from a particular market that meet the highest standards, and thus deserve to be rewarded with preferential access to the U.S. consumer market. It would also make it harder to work with international partners to improve the resilience of supply chains, decarbonize production patterns, or increase workers’ rights. The latter is problematic since nearly all global problems—whether inequality, climate change, migration, or competition with nonmarket economies—require coordination with like-minded partners to address successfully. Second, the events of Trump’s first term demonstrate that world leaders learned quickly that their “tribute” could be paid in the form of a positive headline that plays to Trump’s self-image, rather than in the form of actual commitments that would improve U.S. competitiveness. The Phase 1 trade deal that the first Trump administration made with China, and that Trump called a “momentous step … toward a future of fair and reciprocal trade,” is a perfect example. China bought none of the additional $200 billion in U.S. exports that it had promised to buy. Beijing simply told Trump what he wanted to hear, allowed him to tout the deal to U.S. farmers and manufacturers, and then ignored its commitments, knowing full well that Trump wouldn’t care about the details and that he and the media cycle would lose interest. Third, while the incoming Trump administration may expect that world leaders will come to them hat in hand, offering bilateral concessions if the United States would remove tariffs on their exporters, the reaction of many governments could be noticeably different. In a world defined by dissatisfaction with incumbents, a 10 percent penalty on one’s exporters may prove to be politically useful to world leaders, who would have an obvious person (Trump), country (the United States), and policy (tariffs) to blame for their country’s challenges. Political leaders may conclude that it is better for them to make a public show of their unwillingness to kowtow to Donald Trump than it is to negotiate away a tariff on their exporters. This would be especially true if the private sector deemed a 10 percent or 20 percent tariff too small to alter the economics of where goods are produced and traded from. This would only make imported goods cost more expensive—not just for consumers, but also for all those manufacturers that rely on global supply chains to fuel their production in the United States. In fact, because Trump’s across-the-board tariff idea would treat every exporter the same, there may be little incentive for countries to offer concessions of any kind or for companies to move production from one place to another, since the competitive position of any particular company or country would remain unchanged. Though unlikely, world leaders may even choose to work with each other to collectively oppose the tariffs, rather than bilaterally with the United States to remove them. It should not be surprising, for example, that champions of liberalized trade have already announced new deals as they seek to define themselves in opposition to Trump’s tariff-heavy trade policy and to ensure a consistent supply of the materials and inputs their manufacturers need to compete in an integrated global market. The net effect of this will be to further isolate the United States on the world stage and make it harder for U.S. manufacturers to sell their goods abroad, placing even more pressure on the wages and benefits of factory workers across the country. Fourth, Trump’s across-the-board tariff would likely cause foreign governments and foreign consumers to retaliate against American goods and American companies. World leaders are already signaling their willingness to be aggressive in their use of retaliatory measures, either through tariffs of their own or through actions in a different sphere of competition or influence. By making trade policy such a nationalistic enterprise, the incoming administration is inviting retaliation against symbols of U.S. trade, including U.S. companies operating abroad and imports of U.S.-made or -grown goods. Neither would be helpful to the 10 million U.S. workers whose jobs are supported by exports from the United States. Finally, and perhaps the main reason why his across-the-board tariff is so ill-conceived, the incoming Trump administration’s focus on extracting bilateral concessions would do nothing to position U.S. industry to be more competitive in the future. Revenue generated from tariffs is deposited in the U.S. Treasury; it is not used to finance the build-out of U.S. manufacturing competitiveness, train workers for the jobs of tomorrow, or support increased research and development. These plans would therefore protect the profits of a few CEOs—many of whom are likely to also receive massive tax cuts—with absolutely no guarantee that additional trade protection will result in higher wages for workers, better benefits, or improved working conditions. If the last four years of industrial policy has shown anything, it is that tariffs cannot create growth on their own. They are a critical tool to stem the flow of predatory imports that reach the United States (e.g., steel from China) and an insurance policy to protect the investment needed to grow key industries and shape markets in a manner supportive of workers. But on their own, they are not enough. This is why the first Trump administration’s investment-free, tariff-and-corporate-tax-cut approach to economic policy resulted in a net loss of manufacturing jobs. By contrast, the Biden administration created nearly 800,000 new manufacturing jobs and facilitated $1 trillion in private sector investment in American manufacturing precisely because it paired strategic tariffs with federal investments in the U.S. industrial base’s ability to make the products that will define the future. As for Trump’s even more disruptive tariff idea to impose a 60 percent tariff on all imports from China, the folly increases by an order of magnitude—not just because of added consumer costs, but because of what it would mean for global production patterns. Such a tariff would multiply the cost advantage of producing outside of China and exporting to the United States, but this is likely to induce Chinese manufacturers to move their production to third-country markets—not to the United States. Said another way, Trump’s China-specific tariff idea is a recipe for strengthening China globally instead of slowing its rise. Over time, the presence of more and more Chinese manufacturers—with their functional closeness to the government in Beijing—operating in Southeast Asia, Africa, and Eastern Europe is likely to push governments in these regions of contested influence closer to China’s political and economic orbit. China has already won considerable influence through its combination of indifference to local governance and massive Belt and Road Initiative investments. Add to that its policy of tariff-free trade with China for least-developed countries—particularly for raw materials, critical minerals, and other inputs—and the attractiveness of tighter economic and political cooperation with China will only increase. Note, too, that there is also no way for a China-specific tariff to ensure that Chinese manufacturers that move production elsewhere won’t reinforce the lowest international standards for health and safety, environmental impacts, labor rights, or decent wages when choosing where to produce, since their incentive will be to lower their production costs as much as possible. In fact, the Trump administration’s focus seems to be on disincentivizing Chinese production, instead of rewarding high-standard production wherever it occurs. This, however, would fail to stop the importation of goods produced by exporters that do not pay the full social cost of their production. That is not a recipe for winning back global market share or creating well-paying jobs here at home; it simply means that Chinese investment would further the “race to the bottom” that has been so harmful to American workers. That is not to say that tariffs on Chinese goods are always unjustified. Tariffs and other trade enforcement actions that identify and address specific policy choices made by the government in Beijing are both legitimate and necessary to protect American industry from China’s predatory export policies. In fact, the United States now maintains more trade enforcement actions against China than at any point in its history. But there is a difference in how previous administrations, including his own, used tariffs against China and what Trump has suggested. President-elect Trump has threatened to impose a 25 percent tariff on Canada and Mexico beginning on his first day in office. His objective demonstrates a disinterest in the needs of working people as well as in the legalities of previous agreements already signed by the United States. It also demonstrates a willingness to trade the competitiveness of U.S. producers and their workers for policy commitments that are politically more advantageous for Trump than they are beneficial to the country’s standing in the world. Canada and Mexico are the United States’ two largest trading partners, with trade between the three countries supporting more than 3 million American jobs. Given the close supply chain links between the three countries, many products produced in the United States include component parts and materials imported from either Canada or Mexico. The auto sector is a good example: About 16 percent of all auto parts used by U.S. assembly plants come from Mexico, according to an estimate from the Center for Automotive Research, and much of the steel used in production comes from Canada. If the cost of these inputs increases by 25 percent, the competitiveness of U.S.-made cars will likely decrease, potentially causing layoffs or furloughs, as occurred during the COVID-19-induced supply shortages in 2021 and 2022. It would also further cede international auto markets to manufacturers (and their workers) that produce elsewhere. And finally, Trump recently threatened a 100 percent tariff on the BRICS nations, including China and India, if they created a rival currency to the U.S. dollar. It would be hard to imagine a policy more facilitative of collaboration between the United States’ geostrategic adversaries or one that would more quickly push India into the arms of China and Russia. Moreover, the BRICS countries supply countless parts, materials, and inputs that fuel production of goods in the United States—goods that are both consumed domestically and exported abroad. Taken along with the 25 percent tariff on imports from Canada and Mexico, the impact on U.S. manufacturers and their workers would be staggering. Trump’s seemingly arbitrary approach to trade policy is itself an impediment to the long-term investment needed to rebuild and revitalize American manufacturing and the jobs that go with it. Good and consistent policy facilitates investment, and the incoming Trump administration has not offered either. If President-elect Trump’s first term is any indication, business leaders and his own government officials are likely to be surprised by late-night social media tariff announcements that could—if implemented—dramatically alter the economics of producing in the United States or elsewhere. And, given the significant up-front capital cost of building new manufacturing plans or expanding existing facilities, this lack of predictability serves as a disincentive for firms to invest the type of capital needed to create well-paying, community-sustaining jobs, or to rebuild key parts of critical supply chains. Fewer still will invest if the Trump administration pairs its chaotic trade policy with a removal of the investment incentives enacted by the Biden administration, which have been so successful in creating new manufacturing jobs across the country. Importantly, the absurdity of Trump’s tariff ideas should not distract from the fact that smart, targeted, and thoughtful tariffs can and ought to be part of a trade and industrial policy agenda. The contrast for progressives to draw is not between Trump’s harebrained tariffs and a tariff-free return to the neoliberalism of a now-bygone era. Instead, it is between Trump’s harmful, misguided tariffs and a different approach that uses tariffs to make the U.S. economy more secure, U.S. workers more prosperous, and the climate more sustainable. CAP recently described what such an alternative approach to trade policy could entail, including the innovative idea that tariffs should increasingly be assessed at the firm level, based on the decisions that individual companies make in regard to how well they treat their workers, decarbonize their supply chains, and protect the environment. Rarely are exporters wholly of one market, but instead operate in different markets simultaneously and import component parts and materials from around the world to fuel their production. Trade policy should reflect this reality. As an example, rather than impose a tariff on all products exported from China, it would be better for American workers if a tariff were enacted based on the carbon intensity of the import, allowing American producers and their workers to capitalize on their existing “carbon advantage.” Better yet, the United States could lead the development of a multilateral trade agreement that rewards low-carbon suppliers with better tariff rates and thus new export opportunities, while also erecting a common defense against metals and other imports produced with the benefit of nonmarket policies or that contribute to global overcapacity. Moreover, unlike Trump’s tariff and corporate tax cut approach to economic policy—wherein the wealthy benefit from trade protection and lower taxes and workers face furloughs and layoffs from a policy-induced lack of competitiveness—a progressive approach would ensure that trade policy is closely aligned with a national investment strategy designed to create lasting international competitiveness and a worker-friendly industrial base that supports millions of family-sustaining jobs. The incoming Trump administration has made no secret of their admiration for President William McKinley’s tariffs, which in 1890 increased import duties to an average of just under 50 percent. This increase from existing tariffs at the time was roughly 10 percent, which equates broadly to Trump’s own proposed across-the-board tariff increase. Additionally, McKinley’s tariffs occurred at the height of the Gilded Age and were supported by the largest business tycoons of the day, whose profits increased thanks to added tariff protection. Like Trump’s tariff ideas, McKinley’s tariffs did nothing to help working people. Income inequality continued to accelerate until the Progressive Era a few decades later. Working Americans should take note: Trump’s proposed tariffs would almost certainly have a similar inequality-accelerating effect—and that’s the point. They are meant to support billionaires, not the working or middle class. What is needed in trade policy is not a return to blunt and outdated tariff ideas, Gilded Age protectionism, or the economic nationalism of the pre-World War II era. Instead, the United States needs a modern, progressive, values-based strategy that increases the living standards of working people and addresses the challenges of the 21st century. Such a strategy entails modernizing the United States’ trade policy tool kit, investing in American industry, and ensuring that trade policy rewards those that meet the highest standards. Given that the United States cannot make, mine, or grow everything, and that global cooperation is needed to solve global problems, this strategy should involve working closely with partners and allies instead of demanding their tribute. The incoming administration’s ill-informed view of how tariffs work—for example, that foreign governments pay tariffs—suggests there will be plenty of opportunities to detail how their policies fail the American worker and harm our national interests. Progressives would be wise, though, to do more than point out the faults in Trump’s trade agenda and instead craft a far more compelling, affirmative vision for trade policy based on the needs of working people, job creation, and the realities of 21st-century commerce. The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible. Senior Fellow, International Economic Policy Senior Fellow We are focused on building an inclusive economy by expanding worker power, investing in families, and advancing a social compact that encourages sustainable and equitable growth.Trump’s tariffs should be opposed not just because they increase costs for average Americans, but because they are so clearly bad for workers and the country’s long-term interests.
The folly of Trump’s across-the-board tariff proposals
The Biden administration created nearly 800,000 new manufacturing jobs and facilitated $1 trillion in private sector investment in American manufacturing precisely because it paired strategic tariffs with federal investments in the U.S. industrial base’s ability to make the products that will define the future.
A China trade policy that benefits Beijing?
Trump’s latest tariff ideas are even more harmful to workers
Trump’s chaotic approach to trade policy limits the job-creating potential of American manufacturing
A better approach
A progressive approach would ensure that trade policy is closely aligned with a national investment strategy designed to create lasting international competitiveness and a worker-friendly industrial base that supports millions of family-sustaining jobs.
Conclusion
AUTHORS
Ryan Mulholland
Mike Williams
TEAM
Inclusive Economy