Critics of Trump’s tariff plan say it could spike inflation — he says it’ll boost the US

“The most beautiful word”... what President-elect Donald Trump has called tariffs. During his campaign, Trump vowed to slap a tariff of 10 to 20% on all imports to the US, plus a tariff of 60% or more on shipments from China. He’s also threatened a 100% tariff on some imports from Mexico (avocado lovers are shaking). Tariffs — taxes placed on imported goods — are a tool lots of countries use to protect domestic industries, exert political leverage, and raise tax $$.

• The US already has tariffs to protect key industries. During Trump’s first term, he imposed taxes of up to 25% on $360B worth of Chinese goods. The Biden admin kept most and added more, including a 100% tariff on Chinese EVs.

• But the tariffs Trump’s proposed would be a game changer because they could apply to all $3T worth of the US’s annual imports. An across-the-board tariff of 60%+ on Chinese goods would be a dramatic escalation.

Tariff tiff… The biggest argument against tariffs is that they could make inflation spike. Trade groups have said that Trump’s proposals could lead to broad price increases for consumers (16 Nobel Prize-winning economists agree). A 60% tariff on $20 sneakers from China would mean a company pays $32 to bring them into the US — and is likely to pass some of that extra cost to consumers. e.l.f. Beauty last week said it could raise prices, Steve Madden said it plans to slash its share of China-sourced products, and importers are rushing to ramp up orders ahead of Inauguration Day. Trump’s tariffs could also lead to retaliation from trading partners and dampen US exports by boosting the dollar’s value. Proponents argue that critics fail to factor in the positive effects tariffs could have, including: 

• Boost US manufacturing: Trump says that steep tariffs would force companies to move production to the US, which would create more jobs. Critics say the US no longer has the people or infrastructure to support so much domestic production.

• Raise tax revenue: The gov’t could use the billions of $$ it collects through tariffs to build infrastructure, lower the federal deficit, or offset tax cuts (which Trump’s planning).

• Trade leverage: The US imports way more than it exports, and Trump argues that tariffs would shrink the trade deficit, though the deficit grew during his presidency.