Long before he officially became president, Donald Trump railed against US trade deals. In Interview in the 1980sHe told reporters that deals that have benefited trading partners in Asia and the Middle East have consistently “ripped off” the United States.
Over the decades, that charge could turn up A winning election strategy. As a first-term president and in his 2024 campaign, Trump argued that a one-way global trade system This is not only responsible for the deficit between the US and China, but also behind the decline in American manufacturing and jobs.
Now, Trump has promised a second term Raise taxes – Taxes on imported goods that must be paid when they enter the US – even higher in China and other countries, while regenerating those jobs.
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but Footwear, clothing and auto-parts companies They hope to pass the cost of such tariffs onto American consumers. Yale University Budget Lab Projects that Trump’s proposed tariffs would cost the average American household $7,600 a year with initial price increases of up to 5 percent. These higher costs may affect potential president-elects The campaign pledge is to make inflation “completely invisible”.
Greg Ipp, the Wall Street Journal’s chief economics commentator, said Trump’s trade strategy is a major departure from nearly 80 years of US policy. In a conversation with co-host Noel King Today, explained In the podcast, IP describes how it can play out and have a massive impact on the global economy.
Below is a portion of their conversation, edited for length and clarity. There’s more in the full podcast, so take a listen Today, explained Wherever you get your podcast, incl Apple Podcasts, SpotifyAnd pandora.
Noel King
Trade is a fact of economic life these days. What is Trump’s theory on this and how does it differ from his predecessors?
Greg IP
In the United States, at least since the 1940s, there has been a bipartisan consensus that more trade is better. And it came from a bipartisan view that it made our workers more productive, because they had bigger markets to sell to. This has benefited our consumers as they get cheaper products and a wider variety of products. And it was also good for the US geopolitically because it helped us strengthen our economic ties with countries that were politically like-minded.
Trump comes forward and he argues: This whole regime has been far more to the benefit of other countries than the United States. Countries like Japan and then Germany and now China have taken advantage of the US determination on free trade to increase their trade surpluses with the US, selling a lot of our manufactured goods and not buying much from the US. So his whole mission, from his first term, and now in this one, is to reverse that relationship and, he hopes, force those countries to buy more from the United States, and Americans to buy more from each other instead of from importers. will force That’s theory, anyway.
Noel King
Donald Trump had the opportunity to do all this from 2016 to 2020 when he was in office. What did he do?
Greg IP
He raised tariffs, for example, in a series of tariff hikes. He imposed tariffs on various goods from China. And it followed a long-running lawsuit alleging that China is systematically unfair to the United States, stealing our technology and blocking U.S. exports to China. He then imposed various other types of duties on certain goods.
Noel King
So at the end of that first term … did Donald Trump get what he wanted? Did his plan work?
Greg IP
If Donald Trump’s test of trade policy is a small trade deficit, then no, he didn’t really get what he wanted. The trade deficit when he left office was larger in dollar terms than when he entered office.
Did some production work come back? Probably. But there seems to have been some expense there, too. There were industries that had to pay more for their inputs because of tariffs and lost sales and possibly jobs. And some of our business partners retaliated.
Our trade deficit with China has started to narrow. At the same time, though, you’ve seen our trade deficits with Mexico and Vietnam grow. And what that tells us is that some businesses have responded to Trump’s tariffs not by bringing production back to the United States, but by moving it to other countries — out of China, to Vietnam, to Mexico — that weren’t as affected. duty
Noel King
What is Donald Trump’s plan for the second term?
Greg IP
He wants, number one, to be tougher on China. Instead of imposing tariffs on about half of China’s imports, he has called for tariffs on as much as 60 percent of all Chinese imports. And instead of sparing traditional US allies, he wants to impose tariffs of 10 to 20 percent on each.
But there is one very big caveat to this, which is that we don’t really know if Trump will do exactly what he says.
We know that Trump likes tariffs, but we also know that Trump likes to make deals. So, as in his first term, we see the threat of tariffs primarily as a leverage device — you know, a negotiating chip — where he goes to countries that he thinks are treating the United States unfairly and says, “Here are some things we want you to do.” Do otherwise. And if you do as we request, we will not hit you with the tax I have spoken of.”
Noel King
How close can Donald Trump come to truly changing the way the world trades?
Greg IP
It’s possible that Trump goes ahead with exactly what he says, raises tariffs on everyone, and then all those countries retaliate. They export less to us, we export less to them, trade shrinks and everyone is worse off.
There’s another possibility, which is that a lot of people in the United States and other countries say, “You know, he’s right. The trading system was fundamentally good, but it went off the rails at some point. We need to get together. We need to remake that thing.” .” So I think another possibility is that we’ll end up with a different trade system a few years from now, and perhaps a more realistic view of how China, above all — but some other countries, [too] – I didn’t play by the rules.
But I think, as we’ve learned from his first term, one thing with Donald Trump — you can be sure of it — is that you should expect the unexpected.
