Wednesday March 27 President Trump announced a 25% tariff on every car going into the United States. This comes as Trump pulled back some of his previous tariffs last week. The stock market had shot up at this news and is now back in the red on Wednesday and Thursday. These losses have many American wondering what the Trump administration is doing. So, let’s look at what tariff policies intentions are and what the effects will actually be.
Most economists feel that tariffs will negatively impact the economy. They claim that tariffs will be a tax on consumer goods driving up prices. They also claim that tariffs will hurt the economy overall and may even lead to a recession. The proponents of tariffs claim that globalization has hurt American workers who have taken their job, and that Americans have been getting ripped off. In truth they are both right and putting tariffs in place is one of the biggest risks in American Political history.
So far, the proof is in the pudding that tariffs are hurting the American economy. The stock market is in the red for Trump’s term so far. This is being compared to the substantial gains that the economy made in his first term. This is reflected in the views about Trump’s presidency. According to a recent NBC news poll 44% of Americans approve of the president’s economy compared to the 54% who don’t. This is especially devastating because the president focuses so much on this issue on the campaign trail. These numbers could damage the administration in the midterms and beyond.
On the other hand, Trump is not wrong that Americans have been getting ripped off over the years. The number of high paying manufacturing jobs has declined over the years as free trade has been expanded. There is a lack of ability to compete with countries like China with no federal minimum wage and Mexico with a minimum wage of just $13 a day.
At the same time Americans pay for the defense of alliances such as Nato at much higher rates than developed countries. The average percent of GDP going to the military by NATO countries is 2% compared to the 13% the United States spends annually. Despite the rest of Nato combined having a similar GDP to the U.S. We also spend by far the most on aid to underdeveloped countries. So, the goal with these tariffs is to even the playing field between the United States and the rest of the World. Make it more expensive to create products in the United States and put economic pressure on other countries to support us more.
This gamble is very risky. Trump is betting that although prices go up wages will as well. He is betting that this evens out while raising the median wage of the nation and he goes down in history. Then again it could just end in a global depression.
