The Trade War We're Losing to Ourselves

THE FIRST FEW weeks of the second Trump administration were a whirlwind of counter-productive, illogical trade policies.

- Eric Boehm

Trump returned to the White House with a promise to raise tariffs on his first day in office. That morphed into a threat to tax all imports from Mexico and Canada (two nations with which Trump negotiated a new trade deal during his first term) on February 1. When that date arrived, Trump backed down. Meanwhile, he slapped a new 10 percent tariff on all goods imported from China and followed that with a 25 percent tariff on all steel and aluminum imports. On March 3, the president reversed course again and moved forward with blanket tariffs on imports from Mexico and Canada. Trump also began the process of implementing what he calls “reciprocal tariffs” on all imports, with specific rates to be determined later this year.

That was just the first six weeks. By the time you read this, a global trade war could be in full swing—or Trump may have extracted whatever vague concessions he’s seeking with this chaotic attack on the peaceful exchange of goods.

During his first tenure in office, the president (and some of his top advisers, including Peter Navarro, who now heads the White House’s trade policy team) was obstinate in his claim that China was paying the cost of his tariffs. That was, of course, false. Study after study confirmed what economists had already explained: Tariffs were paid by the American businesses and consumers that purchased tariffed products. The promised benefits for American manufacturers never really materialized, and the small number of jobs created by imposing tariffs on imports were costly—one 2018 study from the Peterson Institute for International Economics concluded that Trump’s 2018 steel tariffs cost $650,000 per job created.