By Eric Boehm, Latest, 2024-05-22
A set of new tariffs proposed by former President Donald Trump would cost the average American family an estimated $1,700 annually—and lower-income households would be hit relatively harder, a new analysis warns.
Trump has called for a 10 percent across-the-board tariff on all imports combined with higher tariffs (potentially as high as 60 percent, he's claimed) aimed specifically at imports from China. Together, those two policies would cost Americans about $500 billion per year, according to the Peterson Institute for International Economics (PIIE), a trade-focused think tank.
“The scale of trade barriers proposed by candidate Trump is unprecedented,” write PIIE senior fellows Kimberly Clausing and Mary E. Lovely. Thanks to the past several years of higher tariffs under both Trump and President Joe Biden, there is ample empirical evidence about the impact of tariffs, they add.
“Importantly, these studies convincingly find no evidence of terms-of-trade benefits for the United States from these tariffs. Rather, the data show that higher tariffs are fully reflected in higher prices for U.S. buyers.”
The PIIE estimate for the cost of Trump's newly proposed tariffs matches what other analyses of the plan have found. Last month, a report from the Center for American Progress (CAP) Action Fund, a left-leaning think tank, estimated that Trump's proposed tariffs would cost the average American household $1,500 annually. That includes “a $90 tax increase on food, a $90 tax increase on prescription drugs, and a $120 tax increase on oil and petroleum products.”
Separately, an analysis by the Tax Foundation estimates that Trump's plans would raise taxes on Americans by more than $300 billion, with the higher prices rebounding throughout the economy, translating into higher costs for businesses and consumers, shrinking economic growth, and diminished exports.
“In contrast to Trump's frequent, and mistaken, claims that foreigners bear the impact of tariffs, economists have long understood that tariffs burden domestic purchasers of imported goods,” the new PIIE report concludes. Even though tariffs provide some protectionism for domestic industries, the report concludes that the “losses to domestic buyers…exceed the sum of benefits to producers and tariff revenues.”
The new PIIE report is also a useful rejoinder to an argument that's recently been pushed by Oren Cass, a former advisor to Sen. Mitt Romney (R–Utah), who has become one of the leading pro-tariff voices within the nationalist conservative movement. Cass has argued on X (formerly Twitter) that economists are misapplying the term “inflationary” to describe tariffs because other tax increases would not be described that way.
There's plenty of evidence that tariffs are inflationary in addition to being a tax increase, but this is ultimately a somewhat pedantic point.
Let's say Cass is right and it's inaccurate to describe tariffs as inflationary because they are taxes. OK, so then Trump is proposing a massive tax hike on American businesses and families. How is that better?
More to the point, the average consumer likely doesn't care whether they are paying higher prices because of inflation or because of taxes. Cass and the other economic nationalists like to pretend they are more in touch with the working class and real Americans' concerns, but trying to explain to regular folks that “don't worry, your household necessities got more expensive because we decided to hike your taxes, not because of inflation” doesn't seem like a winning message to me. As a general rule, Americans don't love paying higher taxes.
It's also pretty telling that the Trump campaign isn't even trying to engage in Cass-style intellectual gymnastics to justify the former president's plan to hike taxes and prices on Americans.
“American people don't need papers from alleged ‘experts' to know that they'll have more money in their pockets with President Trump,” a spokesman for the campaign told Marketwatch.
Being a populist means never having to admit you're wrong. And if someone demonstrates that you are, you can always just claim they are bad because they know things.
