John David Rene, Financial Director at Wall Mart, the largest company in America in terms of annual revenue and the number of employees, He said The Associated Press last week Donald TrumpThe customs tariff policy has already influenced decisions and created a great deal of uncertainty. Rene said: “We are one month of the year, and there is a lot that we do not know.” Walmart executives are not the only ones in the dark. Since he took office five weeks ago, Trump has released a series of ads and repercussions that have left even experienced commercial policy observers that are struggling to keep up with this. (When I asked a commercial expert about Trump’s policies, he laughed and said: “I have no flexible idea.”)
At the beginning of this month, Trump imposed a ten -cent tariff on all Chinese imports and duties of twenty -five percent on imports from Canada and Mexico. The Chinese product tax is now valid, but the duties of Canadian and Mexican elements are pending, waiting for more negotiations. On February 11, Trump ordered the twenty -five percent definitions on steel and aluminum imports, regardless of where it was established. Last week, he said that these fees, which are scheduled to enter into force next month, will be extended to other goods, including cars, computer chips and pharmaceutical preparations. He also instructed his economic team to photograph a series of “mutual definitions” on any country that sets taxes on American exports. The enactment of this proposal will be a major escalation in the Trump’s trade war, and it is not clear how serious it is to take. Speaking to the journalists on Air Force One last week, the president, who in the past referred to himself as “Tariff“It is possible that he would make a kind of commercial deal with the leader of China, Xi Jinping.
Through all this ambiguity, Trump’s assistants insisted that his definitions will not have a negative impact on American consumers and companies. Last week, Peter Navarro, Senior Consultant for Trade and Manufacturing at the White House, He said On New York Time “” “The Daily”, “it will not be painful for America. It will be a beautiful thing.” Speaking to Fox News, Treasury Secretary Scott Payette did not go further than Navarro, a long -term commercial falcon also served in the first Trump administration. But Bessent indicates that “companies on the other side, exporters, will eat a lot of cost.”
To understand the argument made by Navarro and Bessent, it is necessary to understand how the customs tariff works. Some imports, such as games and mobile phones, reach this country in their final form, ready to ship them to stores. Other “intermediate” goods, such as steel or engine components, are linked to American factories, where they are assembled in final products. In both cases, the tax tariff is a hypothesis tax tax in the entry port and collected by American customs and border protection. Paying the tax raises the cost of the goods to the imported party – the retail seller or the manufacturer – which in turn, creates an incentive to pass this increase to consumers in the form of higher prices.
But Navarro and BESSENT claim that this will not happen because foreign exporters, who are concerned about losing their share in the market as the prices of their goods are high, will “eat” some or all the tariffs by reducing the pre -tendency prices that they are exposing the United States. In the case of China, Navarro insists that this is not just a possibility but an inevitable. And he said to Times. He said that the claim that the exporters would reduce their prices “not an assumption.” “This is just a fact.”
Trump’s truth, perhaps. In 2019, Pablo Vagilibum, a professor of economics at the University of California, Los Angeles, and some colleagues, published a paper followed by Chinese goods that were defined by the first Trump administration. Faggilum told me when I called him last week: “What we found is that the prices accused by Chinese exporters did not decrease in response to the imposition of definitions.” The economist indicated that the other teams of researchers also studied the effect of definitions in the first -term, using different data groups, and they also found that these fees were transferred to American companies and consumers in the form of higher prices. “From this group of research, the result is that during the first period of Trump’s state there was a full pass,” said Vagilibum.
one TicketBy three economists from the Federal Reserve and the University of Chicago, they looked at the impact of definitions on imported washing machines, which were imposed at the beginning of 2018. After the imposition of customs tariffs, the average prices of washing machines made by five large manufacturers – GE, LG, Maytag, Samsung, and Whirlpool – and they are sold in five retail dealers – Buy Buy Home Depot, JCPENNEY, Lowe’s and Sears- up to eighty-six dollars, or about twelve percent. Interestingly, the prices of accompanying dryers also increased by ninety dollars. The authors noted: “It seems reasonable that companies in a sample chose to divide the effects of new tariffs on prices between washing machines and dryers, while maintaining the identical price agreement.”
Navarro rejects the main economists, because they were slow to recognize the harmful impact of free trade on American manufacturing factories and societies during the nineties, nineties and thousands. This criticism is valid, but it is now a parallel mistake by ignoring the costs imposed by protectionism on American consumers. The definitions suggested by Trump are much broader than the one he presented in his first term, so it is reasonable to assume that the associated costs will be greater. A study from the non -party tax establishment found that the proposed fees on China, Mexico and Canada alone will reduce the power of US families to buy after taxes by 0.8 percent, on average, in 2025. Since 1993, “according to the study. Another study was estimated, from The Peterson Institute for International Economy, that these same definitions will cost the medium -income family more than twelve dollars a year.
If Trump and his assistants really believe that his tariff will renew American manufacturing and produce an investment and employment, they can provide an argument that these costs deserve to be tolerated. In the case of washing machines, at least, economic researchers found that the first Trump tariff in the first period encouraged manufacturers to transfer some production to the United States, which has created about eighteen jobs. But researchers also found that the costs of consumers in prices were high: more than eight hundred thousand dollars for each new job.
Biden Administration, when it maintained many of Trump’s first definitions and raised some of them-to more than a hundred percent in the case of Chinese electric cars-it was mainly that the high price comparison of jobs deserve it. but Joe BidenThe targeted definitions were much more than the one suggested by Trump 2.0, and it was part of a wider effort Increase green energy and green manufacturing Through the generous benefits of companies and consumers that 2022 Law of reducing inflation (IRA) provided. This active industrial policy has led to a group of large investments in new factories for things like electric car batteries, and has been born a boom in manufacturing. Instead of building on it, Trump is determined to dismantle parts of it. On his first day in office, he issued an executive order that freezes some spending projects related to IRA
