Donald Trump emerged victorious in Tuesday’s United States presidential election, clinching a historic second non-consecutive term and becoming the country’s 47th president.
Upholding his “America First” trade principles, Trump ran on the campaign promise of prioritizing American interests in international trade by renegotiating trade agreements and implementing tariffs on imports. Tariffs are essentially taxes on imported goods, paid by American companies importing those products. The goal is to enhance domestic manufacturing and reduce reliance on foreign products.
His proposals include implementing a general tariff of up to 20% on all imported goods, along with a specific tariff targeting imports from China (60%), which is one of the country’s major trading partners.
Tariffs can protect industries that are considered vital to national security or economic stability by making foreign goods more expensive, thereby increasing the competitiveness of domestic products. This can lead to job preservation in industries like steel, manufacturing and agriculture. By making imports more costly, tariffs can incentivize companies to produce more domestically, potentially leading to the creation of new jobs or the expansion of existing ones. They can also be used as leverage in trade negotiations or to address unfair trade practices.
However, economists generally view tariffs skeptically. As they may provide short-term protection for certain industries, they can also lead to economic inefficiencies and higher costs for businesses and consumers in the long run, as well as potential retaliation from other countries, which could harm U.S. exporters.
Job Creation Or Losses
The impact of tariffs on employment is a double-edged sword, as policies intended to protect certain industries may inadvertently harm others, resulting in a ripple effect across the U.S. economy. While tariffs can safeguard employment in industries facing direct competition from imports, they can simultaneously lead to job losses in sectors dependent upon imported materials or those hit by retaliatory measures from other nations.
Tariffs can potentially create jobs in import-competing domestic industries by making foreign goods more expensive and less competitive.
However, when tariffs increase the cost of imported materials or components, it can harm production and lead to job losses in industries that use those imports. Retaliatory tariffs imposed by other countries in response to U.S. tariffs can reduce demand for U.S. exports, leading to job losses in export-oriented sectors.
There might be an increase in employment opportunities in sectors directly benefiting from tariffs, as companies scale up production to meet the demand that would have otherwise been met by imports.
Small businesses, which often operate with slimmer margins, might struggle more with the increased costs due to tariffs, potentially leading to closures or reduced employment.
During his previous term as president, Trump implemented a series of tariff increases in 2018. They targeted various imported goods, including solar panels, washing machines, steel and aluminum, as well as numerous products originating from China.
The metals tariffs generated a few thousand new jobs in the steel sector, while tariffs on washing machines led to around 1,800 new positions at Whirlpool, Samsung and LG plants in the U.S.
However, when considering the overall impact on employment, any gains in industries competing with imports appear to have been outweighed by job losses in sectors that rely on imported materials and face retaliatory tariffs on their exports, according to research from the Federal Reserve Board.
The Fed’s analysis of tariff impacts reveals that when an industry’s exposure to tariffs increases from the lower quarter to the upper quarter, it experiences a net decrease in manufacturing employment of 1.4%. This overall decline results from the interplay of three factors: while import protection from tariffs contributes a positive 0.3% to employment, this gain is offset by the negative effects of increased input costs (-1.1%) and retaliatory tariffs from other countries (-0.7%).
Moreover, the jobs created came at a significant cost to consumers. Research indicates that American consumers paid about $817,000 in higher prices attributable to the tariffs for every job created in the washing machine industry and $900,000 in the steel industry.