As is often the case with movies, the second part of Trumpeconomics runs the risk of being more radical than the first installment of the saga, and it is not so clear that it will be a success. A possible victory for Donald Trump would endanger the United States economy in his second term in the White House, several studies point out, if the Republican manages to win and decides to implement what he promises.
A few days ago he threatened to raise tariffs on China to 60% or even more. Which would mean more than multiplying current levels by three. A full-fledged trade war, perhaps motivated by geopolitical arguments, but with very uncertain economic consequences.
During his first stage, Trump raised tariff barriers to China for a total of $250 billion. The average tariff on Chinese goods rose from 3 to 12% and then to 20%. The legal basis for this measure is the so-called section 301 of the Trade Act, a 1974 law according to which the North American State can impose trade sanctions on foreign countries that violate agreements or participate in acts that are “unjustifiable” or “unreasonable.” and tax the country's commerce. To justify this retaliation against the WTO, the White House has invoked reasons of national security.
However, the protectionist move has a cost. Already in his first term (2017-2021) Trump imposed tariffs on steel and aluminum which, although it is true that in the short term they increased tax revenues, in the medium term they raised the cost of several industrial projects, which in the end increased the price for American consumers. According to a study commissioned by the USA-China Business Council and prepared by Oxford Economics, Trump's first trade war would have cost half a point to the US GDP. But this total trade war announced against Beijing this time would raise the bill between 1.6 and 1.9 trillion dollars for the United States (the equivalent of about 11,000 dollars for each home) with a loss of between 700,000 and 800,000 jobs. over five years.
Worse still, the scars that this Trumpist measure would leave would cause, according to the aforementioned study, “a permanent loss of income for American firms,” especially those in the manufacturing sector, and a drop in economic potential, equivalent to a cut in 1.4% of GDP. China would obviously be hurt too, but even Europe could suffer if Trump, as he hinted, decided to raise tariff barriers on other countries to 10%. Nobody would win.
The conservative organization Tax Foundation considers that this Trumpian increase would be “an abominable rate” and “a threat that would fragment global trade as has not been seen in centuries” (the use of the word abominable has a historical precedent: when in 1830 The tariffs of the so-called bill of abominations reached 62%, causing many internal imbalances between the North and the South of the country). Adam Posen, president of the Peterson Institute for International Economics, called Trump's trade proposal “lunatic,” causing a loss of market share for American firms in the Chinese market.
Why, then, does Donald Trump seem stubborn in continuing with his protectionist policy despite the economic damage it could mean for the US economy itself? At the outset, it must be remembered that the current president, Democrat Joe Biden, has not lifted any of the measures of his predecessor either. He himself considers tariffs “as an important defensive tool.”
“We must think that the trade distortions of protectionism are not reflected in the aggregate data and the average voter does not perceive them either,” emphasizes the president of EsadeGeo, Professor Angel Saz-Carranza, who has just organized a seminar on deglobalization. “The United States is at full employment, the economy is growing. The data says that value chains are tightening, but they are resilient. And in the end it is more seductive for a campaign to elevate the rhetoric against China,” he maintains. The second parts are usually not as good as the first. With few exceptions.
