- Proposed Tariffs by Trump:
- President-elect Trump has proposed significant tariffs: 10-20% on all imports, at least 60% on Chinese imports, and 25-100% on Mexican imports. These tariffs are expected to negatively impact the American economy by reducing trade, distorting production, and lowering living standards.
- Economic Impact of Tariffs:
- Tariffs act as a tax on imported goods, raising their prices and incentivizing consumers to buy domestically produced goods. While this benefits domestic producers, it harms consumers, leading to less efficient production, reduced economic output, and lower incomes over the long term.
- Inflation and Economic Downturn:
- Tariffs could lead to short-term inflation or an economic downturn, depending on the Federal Reserve’s response. However, the long-term effect of tariffs is consistently associated with lower incomes and reduced production.
- Dynamic Inefficiencies and Reduced Productivity:
- Tariffs create protected domestic markets, reducing competitive pressures and innovation. Protected firms tend to lobby for continued protection rather than investing in research and development, leading to dynamic inefficiencies and decreased productivity.
- Retaliatory Tariffs and Economic Losses:
- Foreign governments are likely to impose retaliatory tariffs on US exports, further reducing US incomes and output. Studies indicate that retaliatory measures could more than double the economic losses from US-imposed tariffs, compounding the negative impact on the economy.
Source Tax Foundation
