Tariffs on foreign goods imposed by former President Trump and maintained by President Biden are damaging the U.S. economy, according to a new analysis.
Tariffs, one of the central elements of continuity under both presidential administrations, are affecting growth, jobs and America’s ability to invest, according to a report by the Tax Foundation, a right-leaning public policy think tank in Washington.
The group projected that the Trump-Biden tariffs would reduce long-run gross domestic product (GDP) by 0.2%, employment by 142,000, and capital stock by 0.1% over the next 10 to 30 years.
“The $79 billion in tariff increases equate to an average annual tax increase of $625 per U.S. household,” wrote Erica York, author of the analysis. “Based on actual tax revenue data, the trade war tariffs directly increase tax revenues by an average of $200-300 per U.S. household per year.”
“Both estimates underestimate the costs to American households because they do not take into account the reduced production, lower incomes, and lost consumer choice that the tariffs have caused,” she added.
During his administration, Trump upended the U.S. trade regime, imposing tariffs on steel and aluminum in 2018 and a 25% tariff on about $50 billion worth of Chinese products.
Biden has kept many of those changes intact while adding his own tweaks. In May, his administration announced higher tariffs on $18 billion worth of Chinese products, some of which will ensure that cheap Chinese-made electric vehicles never enter the U.S. market.
While a protectionist stance would certainly benefit U.S. automakers, who are facing a tough 2023 due to a massive strike by the United Auto Workers union, which President Biden supports, it also undermines the president’s goal of reducing U.S. carbon emissions and protecting the environment.
Biden’s environmental tariffs have been extended to solar panels and washing machines.
The Tax Foundation concluded that the tariffs on solar cells and modules would increase taxes by $200 million based on 2018 standards, while the tariffs on washing machines would increase taxes by $400 million.
The rethinking of U.S. trade policy is now boomeranging around the world as “just-in-time” supply chains, whose vulnerabilities were identified in the wake of the pandemic, are strengthened and rebuilt.
Treasury Secretary Janet Yellen has called this reallocation of value chains “friend-shoring,” and told the Economic Club of New York earlier this month that the process is underway.
“The United States will also continue to pursue an approach that I call friendshoring, deepening ties with a broad range of trusted partners and allies to diversify supply chains and support long-term growth. This also creates great opportunities for our private sector,” she said.
