After hearing about the election results from Nov. 5, you may have seen many people who voted for Trump speaking about how his presidency is going to improve the economy by leaps and bounds. Let’s take a deeper dive into “Trumponomics 2.0” to really understand how his presidency is going to affect our economy.
Trump has promised a “manufacturing renaissance,” which essentially means growth of manufacturing jobs in the U.S. This seems like such a positive action for the US economy, however, there are a lot of negative implications of this that many voters were unaware of due to lack of personal research.
The main plan of action in the “manufacturing renaissance” is to impose massive tariffs on foreign goods. This is an additional tax on goods that are imported to the US. With these tariffs, the idea is to drive up the price of imported goods, so the products made in the US look more appealing.
Voters heard Trump’s plan to “bring manufacturing back to the US” and hopped on the bandwagon without actually understanding the implications of his plan: higher prices, inflation, and interest rates. Ironically, most people who voted for Trump did so due to his promise to lower prices, inflation, and interest rates.
According to USA Today, “Trump is proposing more aggressive tariffs ranging from 60% to 100% on Chinese goods and a universal tariff of up to 20% on imports from all other countries.”
Here’s what economists have to say about Trump’s tariff plan:
- The National Retail Federation: “A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax ultimately comes out of consumers’ pockets through higher prices . . . Trump’s Tariff Proposals Could Cost Americans $78 billion in Annual Spending Power”
- Peterson Institute for International Economics (a non-partisan economic think tank): “Trump’s bigger tariff proposals would cost the typical American household over $2,600 a year”
- Schlossberg of the Wells Fargo Investment Institute: “Most of us feel the tariff proposals are detrimental to the economy as a whole, even though they may benefit certain types of manufacturing at least for a time”
Conclusions:
These are just a few examples of what economists think about the impact of Trump’s tariffs. Looking back at history, the foreign company is rarely who the tariff tax falls on, in the end, prices almost always rise for consumers. According to The National Retail Federation after the tariffs, “the price of a $50 pair of athletic shoes would jump to $59-$64 and a $2,000 mattress and box spring set would end up costing $2,128-$2,190.” Higher prices and a loss of spending power are going to hit lower-income families especially hard.
We can’t say for certain what will happen to the economy in the next four years, but it is clear that there are substantial dangers and trade-offs associated with the promises of broad economic benefits made possible by “Trumponomics.” Voters may have responded favorably to the rhetoric of reviving industry and cutting costs, but the reality is more nuanced given the possibility of increased consumer prices, inflation, and tight household budgets. Monitoring the practical effects of these measures and determining if they are more advantageous for the typical American family will be crucial as we proceed.