Tariffs also are a double-edged sword for American manufacturers, raising the prices of imported materials and components. Many of the products “Made in America” include a significant share of parts and materials made in other countries.
As we wrote earlier this year, reviving domestic manufacturing is a worthy goal. The post-World War II expansion of global trade delivered on its promise of prosperity, but it also caused real problems in the United States and other developed countries. The distribution of benefits was uneven; millions of factory workers lost their jobs. Today, tariffs could be deployed judiciously to support the development of new industries and to protect critical technologies. Some of America’s trading partners have used tariffs to pursue these kinds of goals.
Mr. Trump, however, has raised tariffs indiscriminately. The average effective tariff rate for the United States has soared to 18.6 percent from 2.5 percent when Mr. Trump took office in January, according to the Yale Budget Lab. The new level is far higher than in any other developed nation. The Trump administration boasts that the tariffs are raising billions of dollars in new revenue – perhaps as much as half a trillion dollars per year. But American consumers are largely paying the cost of these new taxes. The tariffs could reduce the purchasing power of the average American household by $2,100 by 2027, the Budget Lab calculates.
Mr. Trump also has argued that tariffs will serve as a cudgel to secure concessions from trading partners, expanding access to foreign markets, and the administration has pointed to agreements with the European Union, Japan and several other nations. Some smaller countries have not even waited to get to the bargaining table to offer deals. After the United States imposed a 33 percent tariff on imports from North Macedonia, for example, the tiny Balkan nation announced that it would eliminate all tariffs on American imports in the hope of better terms.
The willingness of other nations to reduce their own trade barriers, however, actually reflects their continued commitment to the principles that Mr. Trump is rejecting. When Israel announced this spring that it was eliminating tariffs on American imports and easing other kinds of import controls, officials acknowledged that they were acting to appease Mr. Trump. But they emphasized that Israelis would benefit. “What is good for the U.S. is certainly good for the Israeli consumer,” Nir Barkat, the Israeli minister of economy and industry, said in announcing the policy. “Expanding imports from the U.S. will encourage competition, introduce new players into the market, and lower prices for the Israeli people.”