As President Joe Biden and former President Donald Trump solidify their positions with enough delegates to secure their respective party nominations, experts are closely examining how proposed tariffs might impact American consumers.
Although Trump’s campaign has not divulged many specifics regarding tax policies, Trump has reiterated his endorsement of tariffs, which entail taxes imposed on imported goods from other countries.
“I’m a strong proponent of tariffs,” Trump remarked during an appearance on CNBC’s “Squawk Box” on Monday, hinting at the likelihood of reinstating tariffs if re-elected for a second term.
Throughout his first term, which spanned from 2017 to 2021, Trump implemented various tariffs to bolster U.S. industries, including levies on China, Mexico, and the European Union, among others. The Biden administration has opted to retain some of these tariffs.
Trump (Credits: CNBC)
“There’s a notable alignment between the candidates regarding the tariffs initially imposed by Trump and subsequently maintained by Biden,” noted Erica York, a senior economist and research manager at the Tax Foundation’s Center for Federal Tax Policy.
“This is an area that warrants close attention,” she emphasized.
Potential Impact of Tariffs on American Consumers
While the Biden campaign has not provided specifics on tariffs, Trump has proposed a base tariff of 10% on all U.S. imports and a tariff of 60% or higher on Chinese goods.
“This would represent a significant escalation in import duties and could have profoundly negative repercussions,” remarked York.
For instance, a study conducted by the Federal Reserve Bank of New York revealed that the tariffs imposed in 2018 cost the average household $419 annually.
The 10% tariff would result in an annual tax increase exceeding $300 billion for U.S. consumers and could prompt “counteractive tax hikes on U.S. exports by international trade partners,” according to the Tax Foundation.
“When Trump was in office, he often spoke about China footing the bill for these taxes, but in reality, China doesn’t pay them,” as American companies pass on the additional expenses to shareholders, employees, and consumers, explained Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.
“If President Trump raises tariffs on imported goods, it inevitably means that American consumers will bear the brunt, paying more for both imported and domestic products,” he added.
While critics caution that higher tariffs could contribute to inflation, the consumer price index did not surpass the historical average during Trump’s initial term.
