As the presidential election approaches in November, economic experts warn that the former president’s policies may lead to higher prices for consumers and reflect negatively on international trade, without reaping any benefit. US Among them are certain benefits.
The declared goal of Trump’s policies is to rely on tariffs to increase state revenues and use this as a card to pressure countries like China, “they plunder us,” he said, while encouraging companies to return their production centers to the United States.
Trump said during his television debate with his Democratic rival Kamala Harris in September: “After 75 years, other countries will finally have to pay us back for everything we have done for the world.”
“Tax fees, in my opinion, are the most beautiful words,” he announced last week during an election rally in Michigan.
Trump intends to increase customs duties on all imports by 10 to 20 percent, depending on the products, up to 60 percent for Chinese imports and up to 200 percent for cars made in China. Mexico.
In addition to his plans for customs duties, Trump intends to extend the tax cuts approved during his term, which will expire soon, and to additionally reduce taxes on corporate revenues.
However, the Tax Foundation studies office warned that these planned customs duties may “dissipate the benefits of its tax cuts without compensating for the losses in terms of tax revenues.”
High costs
Bernard Yaros, an economist at Oxford Economics, said that such a policy could cause inflation to increase by 0.6 percentage points or even more if the fees were implemented on short notice.
Companies have previously suffered from increased tariffs approved by Trump during his term, but the planned increase may be greater.
Kyle Handley, professor of economics at the University of California in San Diego, explained that “companies saw their import prices increase, and they adapted,” but “if they institute a generalized increase of 10 to 20 percent, it is unlikely that this will not be reflected in the prices in stores.”
It is unlikely that Trump will succeed in returning production to the United States in the near future.
In this regard, Handley pointed out that “we have not manufactured televisions in the United States for decades,” stressing, on the other hand, that American factories do not produce at a level that meets local consumption.
Trump points out that his previous tax increases had no impact on inflation, but Handley considered that the pressures they caused on supply chains would ultimately be equivalent to a 2 to 4 percent increase in customs duties on imports, and several companies admitted to Agence France-Presse that they were forced as a result. So to increase their prices.
A 2019 study published in the Journal of Economic Perspectives estimated that the previous year, tariffs cost American consumers $3.2 billion a month.
Lifting energy regulations
Trump’s plan, if implemented, could reduce the volume of trade between the United States and China by 70 percent, with hundreds of billions of dollars in trade redirected or completely canceled.
Previous tax cuts in 2018 led to a redirection of Chinese exports to other markets, triggering “additional protectionist pressures in countries that received more low-priced Chinese products,” according to Adam Slater of Oxford Economics.
The office explained that US trade exchanges may decrease by 10 percent and be more concentrated on North American countries and other trading partners.
The Peterson Institute reported that other measures in Trump’s plan, such as repealing the “permanent normal trade relations” law that Beijing enjoyed in 2000, could lead to an increase in inflation by 0.4 percentage points.
However, Trump pledged to eliminate inflation, an issue that tops voters’ concerns, promising in particular to cut energy bills by half since his first year in the White House.
Analysts believe that this will require removing more regulations controlling the American oil and gas sectors.
In this context, Yaros considered it uncertain that lifting controls would lead to a significant increase in production, as this would depend primarily on the major energy groups, which in turn must follow the will of their shareholders.
With regard to foodstuffs, Trump intends to reduce the costs of this sector by imposing strict restrictions on imports of agricultural products, while economists warn that such a measure will lead to a similar response, which will greatly harm the American agricultural sector, which relies on exports.
