Opinion | Trump's ideas would stunt U.S. growth and spur inflation - The Washington Post
By: Fareed Zakaria (Washington Post)
An clear discussion on Trump's tariff idiocy for those who want this guy as PotUS.
Here is the accompanying video (better than the article):
S E E D E D C O N T E N T
From the start of his entry into political life, Donald Trump has had one enduring advantage. Many see him as a man who knows a lot about how to generate economic growth for the country. After all, he's a rich businessman and he played a super successful one on prime-time television for years. The feeling is, he must know what creates growth. In fact, almost everything Trump proposes would have the opposite effect.
Take his most important proposals, ones that he repeats constantly: sweeping tariffs on all imported goods and mass deportations of undocumented workers. It is rare to find topics on which economists agree as strongly as they do that both would be bad for growth and cause inflation to spike.
The logic is glaringly obvious. If you raise the price of goods for consumers — which happens because importers will pass the tariffs on to them — and if you reduce the number of workers, you will get fewer people working and fewer people buying stuff.
The Peterson Institute did the math and concluded that depending on how fully Trump would carry out those policies, the American economy would be 2.8 percent to 9.7 percent smaller than otherwise by 2028 and inflation would be between 4.1 percentage points and 7.4 percentage points higher than otherwise by 2026. The Center for American Progress calculated that the typical American family would pay $2,500 more for goods and services each year — a highly regressive form of taxation, since all Americans, rich and poor, would face the same tariff bill. The deportation proposal cannot fully capture the cost of the loss of innovation to the economy, given that immigrants are disproportionately likely to start businesses. So other than massive new regulations and taxes on goods and labor, Trump believes in deregulation.
The damage these proposals would wreak on the American economy is much, much greater than any “anti-business” proposals a Democrat might offer — say an increase in corporate taxes. In fact, most of Kamala Harris’ proposals are closer to center-left than from the Bernie Sanders wing of the party. Some continue the efforts of the Biden administration to invest in the American economy in ways that yield big results — in education, training and health. The expanded child tax credit helped cut childhood poverty by 30 percent for the year it was in place, and we know that investments early in life yield powerful benefits even economically. Beneficiaries grow up to earn more than they would have otherwise and to be less of a burden on taxpayers. Similarly, infrastructure investments are much needed and long-delayed.
But the Biden-Harris administration has also joined the new vogue for government intervention to pick winners and losers, with mixed success. Having campaigned against Trump’s China tariffs, Biden largely kept them. One of Trump’s strongest lines in his debate with Harris was to point out that if she opposed his tariff proposals, how come she and Biden have kept most of them? Recently, the Biden administration completed an exhaustive review of Trump’s tariffs, and it showed the tariffs had been fairly ineffective in changing China’s behavior and in revitalizing American manufacturing. And yet, the administration concluded that the tariffs should be kept because maybe at some point they would work.
Donald Trump attends a casting call for "The Apprentice" in 2006 in Universal City, Calif. (Frazer Harrison/Getty Images)
The Biden administration has wisely blocked China from getting some of the West’s highest-end technology that has military applications, including, crucially, computer chips. But in trying to revive chip manufacturing in the United States, the White House has pledged billions of dollars ( almost $20 billion promised in grants and loans) to U.S. chipmaker Intel. Meanwhile, Intel is in free fall, hemorrhaging customers and cash , its stock price so low that it is now becoming a target for takeover . Intel has failed to adapt to a changed technology landscape, but it is, sadly, the perfect candidate for government money. It is big, respectable, with a storied history, and its CEOs are smooth-talking bureaucrats. Intel seems to be on its way to becoming Boeing , a company that exists largely as a ward of the state .
Both Trump and Harris have plans to address the acute shortage of housing. Trump’s, as usual, is deeply worrying, if you believe he’ll actually carry it out. Seeking lower mortgage rates , he might pressure the Federal Reserve to cut interest rates, as he did when he was president. Harris offers a mix of subsidies to increase supply and demand and also expanded rent controls . Both candidates are wrong, and both should instead take a look at a recent experiment, in our hemisphere, which has had stunning initial success. Argentina’s president, Javier Milei, scrapped his country’s rent control law, among the world’s strictest. As a result , supply of rental housing has increased by 170 percent in Buenos Aires, and rents are down 40 percent by one estimate.
In an age when government intervention is all the vogue, let’s not forget that markets are ultimately what create enduring growth and efficiency. No one needs more reminding of that than the celebrity-businessman in this race.
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It is amazing that there is not more coverage of Trump's utterly stupid plan to impose gratuitous tariffs.
the US economy is at an all time high, so now it's time for trump, and all his wealthy friends to loot it, with the help of his brainless maga sycophants...
Democrats have advocated increasing taxes on business but will exclude foreign businesses? Why isn't that selling out the United States? Why aren't Democrats abandoning the middle class?
I want to know how sending our money offshore to buy consumable, perishable, and disposable goods will grow our economy? These foreign manufactures are outside the jurisdiction of US taxes so they're not contributing anything to the country. These foreign manufacturers are only sucking money out of the country. I want to know how that will grow the US economy? These supply-side neoliberal financial wizards never answer that question.
The supply-side recipe for growth requires making our domestic manufacturing uncompetitive? The growth of our economy depends upon creating low paying service jobs? Our economic prosperity depends upon becoming dependent on credit and debt?
Joe Biden certainly made a concerted effort to become the MAGA President. Biden didn't lower tariffs when he assumed office; consumers haven't been affected less by tariffs the whole time Biden has been President. In fact, Biden has doubled down by adding economic sanctions on top of tariffs. So, the arguments against Trump apply equally well to Biden.
If Trump gets it wrong, so has Biden gotten wrong. We know what Trump will do; every one is whining about that. Does anyone know what Kamala Harris will do? If Harris continues Biden's policies then it doesn't matter who wins because tariffs are here to stay.
What matters is that Trump has got this wrong. And he is talking about insane levels of tariffs.
How can anyone vote for this nutcase?
What I don't get is how the American public voted for him in 2016, because even then his atrocious financial track record was available. He was not a financial wizard, he was and is a stuffed suit that plays one on TV.
I think in 2016 the main reason to vote for Trump was that he was viewed as an apolitical outsider who was going to drain the swamp. The people wanted someone to shake up Congress because they, rightly so, viewed it as corrupt and dysfunctional.
Backfired.
If Trump got it wrong then why did Biden keep the tariffs and double down by adding economic sanctions on top of the tariffs?
Tariffs are supposed to spur American capital to invest in American business. That didn't happen. Biden had to sweeten the pot with subsidies to give taxpayer money to businesses. So, obviously, the tariffs were not high enough to force American capital to keep the money in the US.
How can the US continue to be a capitalist economy if we refuse to invest capital in our own business?
Also, tariffs really are a national security issue. America's first line of defense are its factories. If we can't manufacture enough to supply civilian needs then how are we going to supply military needs? And if an adversary can weaken the US by taking out one factory, doesn't that suggest a dangerous vulnerability that needs to be fixed?
Taxing domestic manufacturers and exempting foreign manufactures really does place the US at a competitive disadvantage. What's wrong with taxing foreign manufacturers and exempting domestic manufacturers? If we replace domestic corporate taxes with revenue from tariffs, won't that lower prices for goods produced in the country? What's wrong with that idea?
Focus on what Trump is trying to do without deflecting to Biden.
Trump is talking about insane levels of tariffs. He stated that he would consider even 500% levels so clearly his plan is to abuse tariffs in an extreme fashion.
How are you going to tax something over which you have no purview?
A tariff is meant to be a way to level the playing field to protect domestic producers. That is, the tariff increases the price that the retailers have to charge for the product to make an equivalent amount of money, thereby letting the domestic producers stay at a competitive price.
You do not seem to understand this.
Biden endorsed Trump's tariffs by keeping them. You're citing experts that claim Trump is wrong. I'm citing an American President who apparently thinks Trump was right because he kept the policy. Biden kept Trump's tariffs in place.
Trump is talking about raising tariffs until American capital begins investing in America. Trump is coupling those increased tariffs with cuts to corporate taxes to lower prices for good produced in the US. Higher priced foreign goods is supposed to be counterbalanced by cheaper domestic goods. And consumer spending would be creating businesses and jobs in the US instead of in foreign countries.
Why is that a bad approach? Why is it so important that we continue to send money out of the country to provide profit for foreign manufacturers? China grew its economy on manufacturing so don't try to tell the public it can't be done.
So, what does taxing domestic business more while lowering tariffs accomplish? Wouldn't that make domestic producers less competitive? How does that approach grow the economy?
I understand the attempt to pander to the public. Yes, selling out the US can provide lower prices. But those imports become increasingly unaffordable as our jobs disappear because domestic producers can't compete.
The tariffs Biden kept are minor compared to what Trump is talking about.
You keep deflecting to Biden in order to defend Trump. What motivates people to defend outrageously stupid policies like Trump's tariffs?
Because tariffs (especially at the levels Trump is talking about) will trigger trade wars and will raise prices on consumers.
How can you not see this??
Well, tariffs most certainly do not produce Donald Trump's magical thinking price reductions and the onus of the increased tax burden will not fall on the foreign manufacturers but rather on the domestic consumers.
It is far to late to put the genie of global capitalism back in the bottle. If people weren't such fucking assholes to everybody on the sacrificial altar of money and "mine" this discussion would be moot. But that thinking is mostly magical, too. One of the points of globalization of the economy was to raise the standard of living across the globe and to a point, it did. So, if we are going global then do it. There are always going to be some businesses that fall through the cracks, countries will be raised and lowered on their economic prowess, but to revert to the old, protectionist ways is not doable.
If 30 years ago we had embraced the changing world markets and climate science, we would be leading the world in the green energy sphere. But we didn't and we aren't because people in entrenched positions of power decided that we were going to stick with oil. Hahahahahahahahaha. What a joke.
The current Republican Party's genu-flop (a combination of genuflection while spastically flopping around) in front of the whole world is embarrassing to observe.
That's true. Higher tariffs must be coupled with reduced corporate taxes.
In case no one has noticed, inflation has been driving up the prices of imported goods while Trump has been out of office. Trump did not do that.
No, it's not too late to turn away from globalization. Reviving the supply-side neoliberal policies of free trade built on promises of cheap prices won't avoid the eventual crash of the economy, either. Too many middlemen are sucking wealth out of the US economy before the lower and middle class has a chance. Globalization has increased income and wealth disparity in the US. Globalization allows the rich to become richer and doesn't provide ladder of opportunity. Globalization has not encouraged American capital to invest in the US economy.
The US economy has not become stronger and more competitive over the last 50 years. Globalization has been gradually killing the US economy.
But we did embrace the changing world markets and climate science. Bill Clinton really did impose policies to advance globalization. Clinton opened the country for imports from China. Clinton also created the environmental economy with energy tax policies, subsidized and mandated use of bio-energy, imposed stricter tail pipe emissions and smokestack emissions, raised CAFE requirements, and increased stricter environmental enforcement.
Just because Clinton's policies didn't deliver the promised results doesn't justify rewriting history. 30 years ago the country really did embrace globalization and environmentalism.
Imposing tariffs on the goods they manufacture isn’t going to cause those countries to contribute anything more to our country. The contribution will come from consumers in America, not from other countries. That’s how tariffs generally work.
Trump already imposed tariffs when he was president . The only people it hurt were American consumers.
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Not quite true. With respect to Europe and Japan, he has. Not for China, though.
Sanctions don’t typically work the same way. Often, they are in the form of us suspending aid to countries, or disrupting trade or banking in the foreign country directly. With tariffs, those countries still get to sell their goods, and any importer or exporter costs just get passed on to the consumer. Of course, either tactic has the potential to impede our GDP.
Those consumers paying tariffs are the same consumers who provide the revenue to pay increased corporate taxes.
So, the smart thing to do is to force our domestic businesses to raise prices (to pay higher taxes) and allow foreign producers to sell to consumers tax-free? Explain how that will create jobs and grow the US economy.
How about South Korea, the Philippines, Vietnam, Malaysia, Indonesia? Explain to me why we want cheap Indonesian palm oil to replace American produced soy oil. Why are Peruvian potatoes better than Idaho potatoes? Why is imported furniture constructed with harvested rain forest wood preferable to furniture built with pine from our own managed forests? Why is Venezuela oil better than North Dakota oil?
Why impose sanctions instead of embargos? The sanctioned company or country is supposed to lose revenue, aren't they? So, the effect of the sanction is intended to accomplish the same goal as tariffs. The sanction, as an embargo, takes the choice away from consumers. Sanctions deprive consumers of imported goods.
No, sanctions don't work the same way as tariffs. But if sanctions and tariffs are truly effective then they both achieve the same result, don't they?
Foreign producers who sell in the US do pay taxes.
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Woah woah woah. Slow your roll. You said Biden didn’t lower tariffs. I showed that he did lower some of them. How about acknowledging that before moving on to totally new topics? Additionally, it should be evident by now, that I’m not a big fan of tariffs, so challenging me to defend them is a little silly.
It’s not so much about which product or producer nation we want to support. These things are traded in a global market. Oils of all type are sold globally. Potatoes are sold globally, and at certain times of year, they may grow better in Peru than they do in America. And if you don’t know that people want different types of wood, then I’d say you have even more to learn.
Depends on the situation, doesn’t it? What are the issues? What are the goals?
it was funny when trump's last round of tariffs bent over the dumb ass american farmers that voted for him ...
Dumb farmers are always funny.
That section of the tax code applies to foreign owners of domestic production. Toyota's Georgetown assembly plant in KY is required to pay corporate taxes in the US. The Toyota plants operating in Japan do not pay corporate taxes in the US; they're subject to import duties (tariffs).
Well, it is true that Biden replaced some tariffs with import quotas that limit access to the US market.
Here's an inconvenient truth for the argument you're making:
Why should Peruvian consumers be forced to compete with US consumers for food grown in Peru? Free trade may benefit US consumers but has not alleviated poverty in Peru. Rural Peru (where the farmers live) is experiencing a 50 pct poverty rate. Peru overall has a poverty rate of 26 to 29 pct.
Some people always have to be complaining, no matter how much they have to shuffle goalposts to do it.