


Yesterday, Jeff Stein of the Washington Post reported that, during a dinner last week at former president Donald Trump’s Bedminster, N.J., country club, Trump and several aides discussed instituting a “universal baseline tariff” of 10 percent on virtually all imports to the United States.
Trade is perhaps the only issue on which Trump has been consistent his entire time in public life, having taken out newspaper advertisements in 1987 decrying other countries’ “taking advantage of” America in their economic relations with us. He has consistently accused U.S. trading partners of ripping us off, leaving Americans in the dust.
That Trump would want a “ring around the collar” of our economy, as he put it in an interview with Larry Kudlow on Fox Business, is nowhere near surprising. But what is interesting about it is that Trump’s positions on trade, when put into practice, actively hurt those Americans for whom he purports to fight. Tariffs increase prices across the spectrum of goods and services, but their most pronounced effect is on low-end consumer products. As the Tax Foundation’s Erica York showed in a 2018 white paper, tariffs are especially crushing for the less-well-off:
Tariffs are taken out of business revenue before it is distributed as compensation to factor inputs (workers and capital). This creates a wedge between what workers and capital produce and the amount they receive; in other words, a wedge between the consumer price and the producer price.
Tariffs ultimately fall on the factors of production and reduce taxpayer labor and capital income. This occurs either by raising prices or reducing wage and capital income. Tariffs tend to be regressive because the average shares of income sources burdened by tariffs are higher for lower-income taxpayers.
In non-economist speak, the extra costs U.S. companies have to pay in order to ship materials in from abroad gets taken out of either workers’ paychecks or customers’ wallets. Now, most trade protectionists argue tariffs incentivize the consumption of domestically produced goods, which may be the case. But “Made in America” products are more expensive than their foreign counterparts, and if we can learn anything from Leonard Reed’s I, Pencil, it’s that producing everything in the U.S. might not be the best allocation of our resources.
There’s also the question of inflation to think about. At a time when so many Americans have felt the pain of exorbitant costs, it doesn’t quite make sense to institute a policy that would push price tags even higher. It makes even less sense coming from a man like Trump, who has devoted so much attention over the years — at least rhetorically — to middle America’s working class, the group of people most deeply affected by inflation.
We know tariffs make for bad policy, but looking at how they actually affect Trump’s base demonstrates something else we’ve also known for a while: He doesn’t actually care about them. The sooner Republican primary voters realize that, the sooner we can move on from the discord of the past eight years and elect someone serious about economic policy.