The U.S. economy is staring down the barrel of a tax increase to the tune of several hundred billion dollars. If the Trump administration follows through with its threats (never a sure thing), we will this week see the imposition of so-called reciprocal tariffs to ostensibly match the burden placed by other countries on U.S. exports.
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As President Donald Trump and administration officials tell it, the move is rooted in a desire to stop foreign countries from ripping Americans off through unfair trade. But such claims warrant considerable skepticism.
The administration’s words and actions make it increasingly clear that this reciprocity talk is just a fig leaf for higher tariffs. They aren’t a means to an end but the end themselves. And unless Congress acts − an unlikely proposition − American businesses and consumers alike will suffer.
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On its face, the pursuit of tariff reciprocity may seem a commonsense approach. Although not exactly the golden rule, it seems darn close. Why not give U.S. trading partners a taste of their own medicine?
But the seductive logic of reciprocity falls apart upon even cursory examination.
Tariffs are a tax on American consumers
Tariffs are a costly and inefficient tax usually borne by the importing country’s consumers. Why should the United States follow suit if other countries are so foolish as to increase those taxes?
Furthermore, there’s no guarantee such a high-pressure approach will prompt U.S. trading partners to change their policies (and history argues the opposite). What has been accomplished if the United States inflicts economic damage to itself while foreigners stand pat (or, as is often the case, retaliate)?
Instead of following foreigners’ whims, Americans should set their trade policies based on what makes sense for the United States. That’s a real “America First” policy.
As details filter out about the administration’s April tariff plans, it’s increasingly apparent that the reciprocity talk is a ploy to quickly raise taxes on imports.
First, the issues that allegedly merit higher U.S. tariffs change almost daily. So far, the list includes topics as varied as foreign tariff and nontariff barriers, domestic tax policy, currency manipulation, wage levels and “labor suppression.” No doubt, fresh justifications await.
Practical considerations further expose the sham. Given the complexity of the task and the government’s limited staff, examining each U.S. trading partner’s policies and their trade effects and calculating an equivalent U.S. tariff in a matter of weeks simply isn’t possible.
For example, a U.S. government investigation launched last year into alleged unfair Chinese trade practices in the maritime industry took months to complete (and even then, delivered a flawed final product). Performing a similar evaluation for every industry, policy and country (even just some) would take years, not weeks − if it were possible at all.
Whatever reciprocal tariffs the Trump administration announces this week will be shoddy guesstimates detached from economic reality, not the rigorous analysis that such matters deserve.
Equally important, the Trump administration has provided no indication that it intends to assess the United States’ own nontariff barriers and then reduce U.S. tariff and nontariff barriers where they exceed those of its trading partners.
It’s certainly not for a lack of such disparities.
U.S. duties of 25% on imported light trucks compare with rates of 10% in the European Union and zero in Japan. Similarly, the Jones Act, which prohibits foreign shipping and foreign-built vessels in domestic commerce, is considered the world’s most restrictive maritime cabotage law. The United States also doles out billions in agriculture, semiconductor and renewable energy subsidies and applies high regulatory barriers on imported food and medical goods.
If the Trump administration is committed to reciprocity, these trade barriers would be nixed for trade with low-barrier countries like New Zealand. There is little chance they will be.
His close trade adviser, Peter Navarro, has repeatedly said (wrongly) that tariffs reduce trade deficits and boost economic growth. And many Republicans see tariffs as a means to pay for extending Trump’s tax cuts.
So why would these tariff aficionados seek reciprocal arrangements in which the United States and its trading partners lower their import duties?
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Let’s acknowledge the obvious: Trump is a committed protectionist. He doesn’t believe that tariffs are a necessary evil, or any kind of evil, but a path to a more prosperous future and fuller federal coffers. Hence, the flimsy, contradictory, and risible justifications for tariffs on some of America’s strongest partners and most reliable allies.
Reciprocity is just the latest excuse for the higher import taxes that Trump has long desired and − abetted by congressional fecklessness − will likely soon get.
Americans may have voted for lower prices in November, but under the guise of tariff reciprocity, the Trump administration is set to deliver something very different.