Trump has gotten America into a trade war with all our major trading partners. He’s put tariffs, which are essentially taxes, on what they sell to us. And they’ve retaliated by putting tariffs on what we sell to them.
Trump’s trade war is dumb and dangerous for 3 reasons:
First: American companies make and sell things all around the world, employ people all over the world, and are owned by investors all over the world. At the same time, foreign companies are here, employing Americans, and exporting from the United States. BMW, a German company, is the biggest automobile exporter from the United States.
Second: Tariffs hurt American workers.
They drive up prices of inputs used by American workers to make all sorts of things – thereby making our workers less competitive internationally. Tariffs on steel hurt American workers who use steel in making cars, appliances, and motorcycles. Tariffs on chips, wires, and circuits hurt American workers who use them for making high-tech products.
Tariffs also drive up the prices of goods bought by American consumers from all over the world, reducing the purchasing power of American wages. They’re the equivalent of a wage cut.
And tariffs push foreign governments to raise tariffs on American exports, thereby making American workers even less competitive. Europe puts a retaliatory tariff on Harley-Davidson’s motorcycle exports, and what happens? Harley moved production to Europe.
The trade war that began in 1930 with the Smoot-Hawley tariff ended up worsening the Great Depression.
Third: The best way to increase the competitiveness of American workers has nothing to do with tariffs. It’s to invest in America.
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