Concerns About Trump's Tariff Plans

By David Lawder

WASHINGTON (Reuters) – Iowa farmer Bob Hemesath is worried that U.S. agriculture will suffer if Donald Trump wins Tuesday's presidential election and follows through on a promise to impose a 60% tariff on Chinese goods, along with a 10% levy on other imports.

Hemesath believes this could lead to a severe repeat of the trade war that occurred during Trump's previous presidency from 2018-2019, where retaliatory tariffs harmed U.S. farm exports, pushing China to source products from Brazil and Argentina. As the chair of the Farmers for Free Trade advocacy group, he expressed concerns about losing market share and the difficulty of regaining it afterward. He did not disclose his voting preference for the election.

Economists warn that Trump's tariff plans, which could raise U.S. import duty rates to levels unseen since the 1930s, might stoke inflation, collapse U.S.-China trade, and provoke retaliatory actions from other countries. A study by the National Corn Growers Association and American Soybean Association echoed Hemesath's worries, predicting significant U.S. crop export losses and further declines in domestic prices due to a renewed trade conflict with China.

Trump, who is in a tight race against Democratic Vice President Kamala Harris, has promoted tariffs as a strategy to revitalize the U.S. manufacturing sector and generate substantial federal revenues over ten years. However, economists agree that the burden of tariffs typically falls on importing companies, who either pass those costs onto consumers or absorb lower profits.

If Trump's tariff proposals are fully enforced, the average U.S. tariff levels could rise to 17.7%, the highest since 1934. This has led to comparisons with the Smoot-Hawley Tariff Act of 1930, which raised tariffs significantly and contributed to the Great Depression through global trade collapse.

Maurice Obstfeld, a former chief economist of the International Monetary Fund, asserted that Trump's approach could dismantle the post-World War Two trading system that promotes low non-discriminatory tariffs. He cautioned that retaliation from other countries would lead to a chaotic trade environment, confusing businesses.

According to Bernard Yaros from Oxford Economics, overall U.S.-China trade could decline by 70%, triggering a complex reshuffling of trade relations globally without reducing the U.S. trade deficit.

Harris criticized Trump’s tariff strategy, labeling it as a “national sales tax” potentially costing U.S. families up to $4,000 annually. Estimates from Yale University's Budget Lab suggest that tariff scenarios could lead to significant drops in household incomes coupled with increased consumer prices.

A Trump campaign representative countered by referencing a study claiming that a 10% universal tariff would not lead to significant price increases and could generate substantial economic growth and job creation.

Despite the lack of major inflation following earlier tariffs, a proposed 60% tariff would dramatically increase duties on everyday Chinese goods. In contrast, Harris supports a more nuanced tariff strategy to safeguard vital U.S. industries.

Immediate Tariff Actions

Trump could implement tariffs swiftly using existing national security laws without needing Congressional approval. Skilled advisors from his prior administration are already in discussions about how to strategically enforce these tariffs, signaling a readiness for substantial trade policy shifts if he is re-elected.

Nazak Nikakhtar, a former Commerce Department assistant secretary, noted that new investigations could provide the basis for implementing tariffs against China’s trade practices swiftly.