The impact of President Trump’s “Liberation Day” The announcement is that higher tariffs will be revealed in the US. Here we provide some notes and quick responses.
1) The announced tariffs represent a very large increase. This is Numbers showing historic US tariff rates. You will notice that the average rate is below 10% throughout the post-World War II era. Squinting will reveal that Trump’s tariffs will increase from his first term in 2017. The 2025 Jump represents the tariffs announced earlier this year. Yesterday, in addition to the announcement of universal tariffs on the US 10% import, more announcements came in many countries, along with all previous announcements. I’m sure the average US tariff rate estimates are still being calculated, but they’ll probably be above 10% in the 20% range. In short, Trump has moved our tariff levels back to the Great Repression era and the second half of the 19th century.
2) For better or worse, the tariffs announced are the complete political responsibility of the Trump administration. This increase in tariffs was the subject of votes rather than bills proposed, discussed and analyzed within Congress. It was prepared in a closed room.
3) It is not clear that President Trump actually has the authority to impose these tariffs by order. Article 1 of the US Constitution laid out the structure and authority of the Legislative Branch State of Section 8. “Congress has the power to collect and collect taxes, obligations, fraud, debts, and pay debts, and provide the common welfare and general welfare of the United States.” Over time, Congress has passed laws that grant the President the power to impose tariffs on certain industries on certain environments, but Trump in fact claims that these partial and fragmented laws have delegated him full power over tariffs as it is a “national emergency” that has been a trade hindrance in the US economy since the 1980s. perhaps! But Trump’s declaration of a “national emergency” to assert full power over tariff setting is contrary to the obvious texts of the Constitution.
4) The amount of tariffs appears arbitrary and unclear, as US import duties is theoretically half of the foreign level, or 10%, whichever is higher. but James Sliowecki The Trump administration clearly adopted a trade deficit on goods with countries, divided by the total US imports from that country, and reported that it called the country’s “customer rate.” The minor problem with this calculation is that it does not include services, but only deals with goods. The big problem is that this is not the tariff rates that other countries are actually charging. My guess is that these announced tariff rate adjustments are blizzards. In other words, the uncertainty surrounding them continues.
5) A promise has been made by the Trump administration regarding the benefits of this proposal. For example, the new tariffs would not cause price increases for US consumers, as there was a promise that all duties on imports would be paid by foreigners. The new tariffs are committed to raising $600 billion a year in additional federal revenues. It promises to dramatically increase the number of jobs in US manufacturing, and to eliminate the US trade deficit. for examplewhen President Trump was talking about the coming tariffs, he said: “That’s all I know. We accept hundreds of millions of dollars with tariffs. We’ll be very rich. You don’t know where to spend all that money!
6) These predictions regarding the positive effects of tariffs should be remembered. The forecast does not fit standard economic beliefs regarding the impact of tariffs. (Indeed, given all these promised benefits, do you wonder why Trump didn’t set tariffs at a much higher level?) If the profits come true, Trump deserves enormous credibility. Conversely, if they don’t come true and there will be more disastrous economic outcomes, Trump would be worthy of great responsibility.
7) Like it or not, US multinationals have invested in global networks for both purchasing supplies and export products over the past decades. With port tariffs much higher, the value of investments by major US companies has been hit by a real blow. If other countries retaliate against US exports, these major companies and all US exports, including agricultural products, will also be hit. The cost of reorganizing the supply chain and selling exports for US companies is very realistic. The cost of losing the share of existing profits from trade is very realistic.
8) I’m not a political savant, but it appears that President Trump is making a potentially huge forced mistake by raising tariffs so dramatically. For example, in many Trump policies that oppose tougher immigration, so-called “day” efforts, hunt government waste and abuse, and oppose others, he has quite a popular support behind him. However, I have not observed similar general protests about the virtually high tariffs. Instead, many Trump voters expressed strong concern about rising costs of living. These voters are not amusing if they find that prices of imported goods are rising (or much less available for such goods) and that there is a lack of competition from imported goods, so do domestic producers tend to rise as well. Trump voters working in an industry that relies on exports will not be amusing to see international markets falling as well. Furthermore, enacting these tariff policies near the start of his term will create policy implications while Trump is still president. Credits and responsibility will be him.
9) The US enacted high tariffs during the Great Repression – the infamous Smoot Holy Tariff of 1930. These tariffs were not the main cause of depression, but they didn’t help either. My sense is that those failed tariff experiences have been part of the shared political consciousness of the US over decades. However, the experience eventually faded into popular memories. My expectations about Trump’s tariffs are that there will be a wave of lobbying and renegotiation, each one will insist on another victory over his approach. But I confess to dark thoughts. As part of me wants Trump to maintain his tariffs until it becomes widely apparent to everyone, modern awareness of why this approach doesn’t work could be effective over the next few decades.
10) President Trump’s claims about tariff benefits seem to be based on clearly false beliefs. For example, he appears to believe that trade imbalances are the result of tariffs, and that the existence of trade balances proves that other countries impose unfair trade imbalances, and that mutual inequality by the US excludes trade imbalances. He appears to believe that import duties will not affect prices for US consumers. He appears to believe tariffs will bring back manufacturing jobs in the US, despite declining manufacturing jobs worldwide, including in China. This is not plausible. Trump also appears to have a stronger US economy due to his more limited relationship to global trade. However, I am not aware of the real world examples of the country that enriched itself by withdrawing from the global economy.
