Monday, May 27, 2024

Former President Donald J. Trump is planning an aggressive expansion of his first-term efforts to upend America’s trade policies if he returns to power in 2025 — including imposing a new tax on “most imported goods” that would risk alienating allies and igniting a global trade war.

While the Biden administration has kept tariffs that Mr. Trump imposed on China, Mr. Trump would go far beyond that and try to wrench apart the world’s two largest economies, which exchanged some $758 billion in goods and services last year. Mr. Trump has said he would “enact aggressive new restrictions on Chinese ownership” of a broad range of assets in the United States, bar Americans from investing in China and phase in a complete ban on imports of key categories of Chinese-made goods like electronics, steel and pharmaceuticals.

“We will impose stiff penalties on China and all other nations as they abuse us,” Mr. Trump declared at a recent rally in Durham, N.H.

In an interview, Robert Lighthizer, who was the Trump administration’s top trade negotiator and would most likely play a key role in a second term, gave the most expansive and detailed explanation yet of Mr. Trump’s trade agenda. Mr. Trump’s campaign referred questions for this article to Mr. Lighthizer, and campaign officials were on the phone for the discussion.

Essentially, Mr. Trump’s trade agenda aims at backing the United States away from integration with the global economy and steering the country toward becoming more self-contained: producing a larger share of what it consumes and wielding its might through one-on-one dealings with other countries.

Mr. Trump, who calls himself a “tariff man,” took steps in that direction as president, including placing tariffs on various imports, hamstringing the World Trade Organization and starting a trade war with China. If he is elected, he plans a more audacious intervention in hopes of eliminating the trade deficit and bolstering manufacturing — with potentially seismic consequences for jobs, prices, diplomatic relations and the global trading system.

His plans — which he has described as “a sweeping pro-American overhaul of our tax and trade policy” — would amount to a high-stakes gamble with the economy’s health, given that unemployment has dropped to 3.7 percent, inflation has substantially cooled from its post-pandemic spike, about 200,000 jobs are being created each month and the stock market is near a record high.

Mr. Trump’s plans have drawn warnings from trade experts with more traditional economic views. Daniel M. Price, a top international economics adviser in the George W. Bush White House, called the plans “erratic and irrational.” He said that the costs would be borne by U.S. consumers and producers, and that the plans would risk alienating allies.

Evaluating the merits of Mr. Trump’s trade vision is complex because there could be multiple ripple effects, and he is seeking long-term changes. But many economic studies concluded that the tariffs he imposed as president cost American society more than the benefits they produced.

Research from economists at the Federal Reserve and the University of Chicago found that tariffs Mr. Trump imposed on washing machines in 2018 created about 1,800 jobs while raising the median prices consumers paid for new washers and dryers by $86 and $92 per unit. That spending added up to about $817,000 per job.

But Mr. Lighthizer dismissed studies critical of Mr. Trump’s tariffs, describing them as biased in favor of free trade and arguing that inflation had held steady during the administration. He also said that while efficiency, profits and low prices were important, the priority should be encouraging more manufacturing jobs for Americans without college degrees.

Mr. Trump began his presidency in 2017 by hiring economic advisers with diverse views — including advocates of protectionist policies, like Mr. Lighthizer and Peter Navarro, as well as Wall Street veterans oriented toward free trade and skeptical of tariffs, like the former Goldman Sachs president Gary D. Cohn.

But the economic advisers he remains close with are overwhelmingly in the pro-tariff ideological mold, like Mr. Lighthizer. His more aggressive plans for a second term would most likely face far less internal opposition than they did in his first term.

Universal Tariffs

The most globally far-reaching of Mr. Trump’s 2025 trade policy plans is to impose a so-called universal baseline tariff, meaning a new tax on most imported goods.

The Trump campaign has not specified how high this tariff would be. In an August interview on Fox Business, Mr. Trump threw out a figure of 10 percent, saying “I think we should have a ring around the collar” of the U.S. economy.

Mr. Trump has been vague about other details. Among them, he has not explained whether he envisions the universal tariff as a new floor or an add-on to existing ones. For example, if an imported product was now taxed at 5 percent, would that rate rise to 10 percent or to 15 percent? The latter, Mr. Lighthizer said.

Nor has Mr. Trump said whether the new tariff would apply to imports from the nearly two dozen countries with which the United States has free trade deals. They include Canada and Mexico, which together account for nearly a fifth of the overall U.S. trade deficit in goods, and with which Mr. Trump’s administration renegotiated the nearly tariff-free trade deal that replaced NAFTA.

The Trump campaign noted that Mr. Trump has not announced any decision on that question. But Canada’s ambassador to the United States, Kirsten Hillman, said in an interview that her country believes its exports should be exempted from any new universal tariffs.

Mr. Trump has also not said whether he thinks he could unilaterally impose the sweeping new tariff under existing law or would need Congress to authorize it.

Clete Willems, who served as deputy assistant to the president for international economics in the Trump administration, said in an interview that he sympathized with Mr. Trump’s desire for reciprocity, but added: “The president’s authority to enact across-the-board tariff hikes is unclear, and I’m skeptical Congress is going to endorse it.”

But Mr. Lighthizer said that given the size of the U.S. trade deficit and its impact on the American economy, a president would have “clear authority” under two laws — the International Emergency Economic Powers Act and Section 338 of the Tariff Act of 1930 — to impose tariffs unilaterally.

Still, he said, depending on political conditions, Mr. Trump might instead choose to ask Congress to enact new legislation so that a successor would not be able to easily revoke it. “He has the legal authority to do it and he’s got two routes,” Mr. Lighthizer said. “He hasn’t made that choice as far as I know.”

Regardless of the legal authority, a swirl of dislocating losses and gains would ripple out from such a policy of universal tariffs. On the one hand, some domestic manufacturing would rise since domestic makers of rival goods could raise their prices and expand production. That is Mr. Trump’s focus: “We will quickly become a manufacturing powerhouse like the world has never seen before,” he promised in a campaign video.

As a matter of textbook economics, there would also be downsides. It would amount to a tax increase passed onto consumers in the form of higher prices — one that would fall more heavily on poorer people since they spend a higher portion of their incomes on goods.

The policy could also lead to downward pressure on other domestic manufacturing. Producers who buy inputs from abroad would pay higher costs, making their products less efficient and competitive. This would inflate their prices and reduce consumer demand, leading to layoffs, business closures, and reduced consumption and investment in the economy commented in the final article structure.

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