President-elect Donald Trump consistently promised two things on the campaign trail: sweeping tariffs and broad tax cuts for just about every segment of the economy.
Can he now pull off those pledges, and what will the impacts be?
Clark Packard, a research fellow for trade policies at the libertarian-leaning Cato Institute, joined KNX News’ daily political show Countdown 2024 to discuss.
Listen here:
While Trump has claimed that the import taxes would hurt foreign countries rather than American consumers, Packard said that isn’t really true. Companies tend to make up for the additional tax burden by raising prices.
“Ultimately, the vast majority of the tariff is passed along to consumers,” he said. “The best estimates that we have are about 90% of the cost of a tariff will fall on the American consumer.”
If Trump is able to implement the taxes he’s proposed – including a 10% across-the-board tariff and a 60% tariff on all imports from China – Packard said it would cost the average American family about $2,600 per year.
“But beyond that, you, you would see foreign retaliation,” he said. “So China would target, let's say soybeans. And so if you're an American soybean producer, you're now gonna face a larger tax when you send the product abroad.”
For what it’s worth, there was a time when the U.S. did have substantial widespread tariffs on products coming from overseas – in the era leading up to the Great Depression.
“My understanding of the economics of that situation are that the tariffs sort of exacerbated what was already a pretty serious depression and then prolonged the depression as well,” Packard said.
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Packard said the U.S. “learned a lesson” from the Great Depression, lowering trade barriers in the postwar era. But Trump’s proposed tariffs, if they’re implemented, could lead us into a recession.
“That's one of my grave concerns, that it has the potential to kind of spiral out of control and lead to a really broad trade war and then that triggers potentially a very serious recession in the US and around the world,” he said.
Listen to the full episode above to hear tax attorney Edward McCaffery discuss Trump’s promised tax breaks, and catch new episodes of Countdown 2024 every weekday at 2:30 p.m.
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