Can higher tariffs bring greater prosperity to US?

Trump's reelection marks a strong resurgence of protectionism in the United States, with his administration implementing a range of trade protectionist policies early in his second term.

These include a 25 percent tariff on imports from Canada and Mexico (which was then promptly temporarily delayed), a 10 percent tariff increase on Chinese imports and, more recently, an increase in tariffs on steel and aluminum imports. Trump also plans to introduce a reciprocal tariff that would take effect almost immediately, applying to all countries and matching the tariff rates imposed by each trading partner.

Trump's tariff policies are rooted in his belief that globalization has caused the US to lose out to major trading partners like China, Mexico and Canada. He has argued that while these countries benefit from US trade, his country is left with a large trade deficit and diminishing economic power. For Trump, this situation justifies a shift away from international agreements and global trade systems, with a focus on rewriting trade rules to prioritize US interests.

As he declared during his campaign, Trump believes tariffs will bring multiple benefits to the US. Trump asserted that high tariffs will revitalize domestic manufacturing by encouraging companies to produce goods in the US, creating jobs and boosting wages. He claims that the increased fiscal revenue brought about by tariffs would allow the US to carry out domestic tax reduction reforms, bringing lower tax burdens to domestic businesses and households. He also sees tariffs as a means to enhance national security by cutting reliance on foreign supply chains, ensuring more economic independence. Additionally, he views tariffs as a tool to counter unfair trade practices like currency manipulation and industry subsidies, leveling the playing field for US firms.

These benefits all seem enticing. However, Trump's tariffs may not achieve their stated goals for the following reasons.

First, economic research shows that high tariffs do not lead to job creation, wage increases or economic growth over the long run. On the contrary, tariff increases have an adverse impact on output, productivity and consumption. Tariff increases also lead to more unemployment and higher inequality, further adding to the deadweight losses of tariffs. Mainstream economists are generally skeptical of tariffs, considering them a mostly inefficient means for governments to promote prosperity. A National Bureau of Economic Research working paper examining the effects of Trump's first-term trade war found that it has not to date provided economic support for the US heartland: import tariffs on foreign goods neither raised nor lowered US employment in newly protected sectors; and retaliatory tariffs had clear negative employment impacts, primarily in agriculture. These detriments were only partly mitigated by compensatory US agricultural subsidies. Protectionist tariff policies have increased political support for Trump in these regions, but the tariffs have not brought corresponding economic returns to these regions.

Second, high tariffs alone cannot achieve the policy goals of balanced trade and domestic tax reductions. In the era of global production, the US, like other major global economies, has a large amount of imported intermediate inputs in its exports. Many US exports use imports as intermediate inputs to final goods produced domestically. Raising the cost of these inputs through tariffs will raise the prices of such US exports and make them less competitive abroad. Moreover, trading partners are likely to retaliate against US tariffs with corresponding duties of their own, making exports more expensive overseas. High and widespread tariffs that reduce both exports and imports will leave the trade balance roughly unchanged. Even in the most extreme case, the goal of using tariff revenue to offset domestic tax cuts will be difficult to achieve without effective domestic reforms. International research think tank Tax Foundation estimates Trump's most extreme tariff proposals — a 20 percent universal tariff plus a 60 percent tariff on China's exports to the US — would raise about $3.8 trillion over the 10-year budget window, falling short of the $4.3 trillion needed to fully offset the cost of making the expiring tax cuts permanent.

Third, high tariffs may do little to advance US national security or supply chain resilience because they fail to address the structural challenges of domestic production and global supply chain complexity. Simply making foreign goods more expensive does not guarantee that critical industries will relocate to the US, as businesses may instead shift sourcing to other low-cost countries or absorb higher costs without reshoring production. Tariffs also raise input costs for domestic manufacturers, making it harder for them to compete globally and potentially weakening key industries rather than strengthening them. Building a country's manufacturing competitiveness requires long-term policy efforts, including improving innovation, infrastructure, education and workforce development. Tariffs cannot provide effective assistance in these areas.

Moreover, the protectionist trade policy of "America First" will bring additional risks not only to the US, but also to the world.

Beyond the US, Trump's trade policies carry significant risks for the global trade system. The increasing use of tariffs as a strategic tool, particularly in areas like drug and immigration policy, is creating more uncertainty in international markets. This approach undermines existing global trade norms, leading to potential trade wars, fragmented supply chains and reduced international cooperation. By weakening Washington's role in shaping global trade rules, the country risks losing influence to its allies and trading partners. Historically, the US has played a key role in promoting open markets and shaping the rules of international trade. If the US steps back from this role, other countries may fill the void. Washington may face a rewritten set of global trade rules that may not be in its interests.

In conclusion, while Trump's tariff policies aim to secure economic benefits for the US, they may not lead to the prosperity he envisions. High tariffs could increase production costs, raise consumer prices and stifle innovation, ultimately harming US competitiveness and global standing. As the global trading system becomes more fragmented, the US may face a more volatile and uncertain economic future, rather than a hoped-for greater prosperity.

The writer is an assistant research fellow at the Institute of American Studies, Chinese Academy of Social Sciences.

The views do not necessarily reflect those of China Daily.