President-elect Donald Trump has threatened to impose steep tariffs on imports from China and Mexico in an effort to bring manufacturing jobs back to the United States.
The impulse is understandable. If you make imports more expensive, the logic goes, goods manufactured here will be more competitive.
But Trump’s trade policies, if implemented, would hurt the working class Americans he says he wants to help. The ideas could also trigger a global recession or depression that would make the 2008 economic crisis look mild in comparison.
Most of the manufacturing jobs America has lost have been replaced not by the Chinese or Mexicans but by technology. The value of U.S. manufacturing is at an all-time high.
But history shows that even the jobs that have moved overseas won’t be brought back by a trade war. The Great Depression of the 1930s was triggered and deepened by tariffs Congress slapped on imports. And more recent examples show why tariffs are more likely to hurt American workers than help.
President George W. Bush tried to protect the steel industry with tariffs in 2002. But the tariffs drove up steel prices and killed thousands of jobs in companies that needed steel to make their products, including the automobile industry.
Those tariffs also prompted the European Union to threaten retaliation against American-grown citrus, U.S. textile products and Harley-Davidson motorcycles, targets chosen to hurt battleground states Bush needed to win re-election in 2004. Bush lifted the sanctions after 21 months.
President Barack Obama imposed tariffs on tire imports in 2009, and American tire manufacturers increased employment from 50,800 in 2009 to 52,000 in 2011. But American consumers were forced to spend $1.1 billion more for tires than they otherwise would have.
The tire tariffs also led China to impose retaliatory levies on poultry, which caused a 90 percent reduction in American exports and cost the poultry industry more than $1 billion. Obama let the tariffs expire in 2012.
Although restrictions on imports are often popular in the abstract, most people know from their own lives that they are not helpful. Few people willingly pay higher prices when shopping for food, clothing, electronics or cars. Why would they want the government to force them to do so?
But the case for freer trade is about more than just getting “cheap stuff.” If consumers pay less for a product made overseas, they have more money left to spend or invest at home, which ultimately helps grow the economy. And if an American business pays less for a component that goes into a product it is making, that company is going to be more competitive, sell more of its goods and employ more people.
In the past week Trump’s aides have been backing off his tariff threats and suggesting he will support a more nuanced “border adjustment” of the corporate income tax. That’s a novel and intriguing idea that’s never been tried before, and in its purest form, it might make sense. But if Trump tries to turn the plan into a way to punish imports, it will be a mistake.
The president-elect’s understanding of the economy seems to be based on his real estate and branding businesses, rather than the complex, interlocking arrangements that have made the U.S. economy the strongest in the world. He has also hired advisers who want to restrict the freedom of Americans to buy and sell as they choose.
If Trump doesn’t check these impulses, U.S. consumers and workers will be the ones who pay the price.
Daniel Weintraub is editor of the California Health Report. Contact him at Daniel.email@example.com