Trade protectionism has become one point of contention in the US presidential race as former President Donald Trump and Vice President Kamala Harris seek to differentiate their proposed solutions for voters' economic concerns ahead of Election Day.
Trump has said, if elected, he would pursue a universal tariff of at least 10% on all US imports with a higher rate on goods from China. The proposal of a "baseline tariff" has been included in the Republican Party's official policy agenda as a solution to "rebalance trade" and "protect American workers and farmers from unfair trade."
Harris has not been as explicit in outlining her own vision for trade, though experts largely see her extending many of President Joe Biden's trade policies and initiatives.
"Unless she says otherwise, we would expect her to continue the pattern we have seen in the Biden administration: avoiding new free trade agreements, targeted trade and national security restrictions on trade with China, promotion of labor rights and environmental protection, industrial subsidies and a willingness to impose import measures to shield industries like steel and green energy," said David Bond, a partner and head of the global international trade group at law firm White & Case.
Candidates differ in appeal to inflation concerns
Both presidential candidates' campaigns highlight trade and other economic issues as inflation continues its slow retreat from decadelong highs spurred by pandemic-era supply chain disruptions.
During the first round of questioning in the Sept. 10 presidential debate, Harris described Trump's tariff proposal as a "sales tax" on consumers that would aggravate inflation. In response, Trump defended his plan for a universal tariff, saying that the tariff programs implemented during his previous presidency generated additional federal revenue, did not trigger inflation and have not been significantly cut by the Biden administration due to their effectiveness.
Trump's 2018 trade actions included tariffs on a wide slate of imports from China and almost universal tariffs on steel and aluminum. Under Biden, the tariffs on China have increased, while the tariffs on steel and aluminum have been slowly repealed and adjusted.
Annual US federal revenue from tariffs did trend downward from 2016 to 2018. Tariff revenue then picked up in 2019 and hit record levels in the years following the 2020 onset of the COVID-19 pandemic.
While Harris raised the alarm about the inflation risk posed by Trump's universal tariff suggestion, she presented nontrade-related proposals to tackle inflation such as a crackdown on price gouging and tax credits for first-time homebuyers.
The precise impacts of the candidates' proposals have been a matter of debate, though economists warn that the policies could do more harm than good to the US economy.
"The major policies that both candidates are talking about, when we're looking at tariffs from Trump and price controls from Harris, are two areas where economists mostly agree that these are bad policies and that we know the consequences," said Erica York, senior economist and research director at the Tax Foundation. "We know they don't work out as intended, and yet they seem to do well politically."
Tariffs and inflation
The monthly year-over-year change to US inflation hovered just above the 10-year rolling average for the metric during Trump's presidency from 2017 to 2021, trending moderately higher than during then-President Barack Obama's second term from 2013 to 2017 when markets were normalizing following the impact of the 2008 financial crisis.
Tariffs can lead to higher costs that are absorbed by consumers to varying degrees, though the impact can vary based on the industries and countries involved. In a 2023 report, the US International Trade Commission found that the 2018 tariffs implemented by Trump on imports from China increased the price of domestically produced products by 0.2% and the value of domestic production by 0.4% on average from 2018 to 2021.
"The research generally points to very small increases in prices, so US business likely ate most of the cost of the tariffs," said Bond.
However, the overall economic impacts of Trump's 2018 tariff programs may have been curbed due to the size of the US economy compared with the volume of trade impacted by the duties.
"Contrasting with that, the tariff Trump is promising for his second term … is far larger, so we should expect the economic effects to also be larger," Bond said.
While tariffs can be linked with a lift in prices, they do not necessarily correlate with long-term inflation trends, the Tax Foundation's York said.
"It's a one-time blip for the goods that are affected, and the higher price is just there to stay as a higher price level for those tariffed goods," York said. "If we did see a universal tariff, that probably would get picked up in [the consumer price index] because it's on such a broad category of goods … it gets picked up in prices that one time, and from then on, it's baked into that level."
Unintended consequences
While the long-term impact on consumer prices and inflation from a potential new universal tariff may be uncertain, the threat of foreign trade retaliation is more definite.
"We would expect governments to retaliate against US businesses in response to any new tariffs and for this to have a broader impact on US businesses," Bond said.
Any intended positive benefits of the tariff could be negligible and could also be dwarfed by the consequences of trade retaliation, said Pao-Lin Tien, an assistant professor and director of undergraduate studies at The George Washington University's Department of Economics.
"The long-run impact really doesn't make a difference on the trade deficit, but it has the impact of increasing the value of the US dollar in real terms as a result, and that by itself [could reduce] exports," Tien said in an interview.
"In the short term, we also see increases in prices because the importing companies will pass on a lot of those tariffs to consumer products that we import from China, for example."