If there’s one consistent theme to GOP presidential hopeful Donald Trump’s often confusing worldview, it’s that the cure for what ails America — from immigration to jobs to taxes — is more tariffs.
There seem to be few things Trump relishes more than threatening to slap fees on other country’s goods. He proposed eliminating corporate taxes in favor of a 20% tax on imports and a 15% tax on American companies who outsource in his 2011 book “Time To Get Tough.” More recently, he has called for a 35% tax on Mexican auto imports and threatened to “do something very severe” to force Mexico to finance a border fence, possibly punitive tariffs. And when it comes to China, another favorite Trump bogeyman, he offered this memorable message in a 2011 speech: “Listen, you motherf—ers, we’re going to tax you 25%!”
Trump, like many populist politicians, is a fierce critic of free trade deals that like the North American Free Trade Agreement (NAFTA), which was signed by President Bill Clinton, and the Trans-Pacific Partnership, which is currently under negotiation. When it comes to aggressively raising tariffs, however, his proposals appear to be unique within the 2016 field in either party.
There’s not a lot of detail to Trump’s suggestions, making them hard to fully evaluate, but trade experts from across the political spectrum warn that most of his threatened tariffs would violate decades of binding trade deals negotiated by previous administrations and agreed to by previous Congresses.
“That 20% tax would be an absolutely straightforward violation of probably every trade law the United States has with any other country,” Joshua Meltzer, a fellow in global economy and development at the Brookings Institution, told msnbc.
“All of our existing agreements lock us into lower tariffs,” Claude Barfield, a scholar at the American Enterprise Institute who supports lowered trade barriers, told msnbc.
“Absolutely illegal,” Robert E. Scott, director of trade and manufacturing research at the Economic Policy Institute and a strong critic of past trade agreements like NAFTA, told msnbc when asked about Trump’s 20% import tax.
Trump’s tariff obsession harkens back to the partisan politics of the 19th and early 20th century, when Republicans championed high tariffs in order to protect business from competition while Democrats argued the tariffs punished the working class by raising prices. This split was one of the fundamental divides between the parties until after World War II, when the U.S. led international talks to lower tariffs around the world that had been widely blamed for worsening the Great Depression.
The result of the last 60-plus years of free trade deals, in addition to massive reductions in tariffs, is that there are significant legal barriers to Trump’s favorite negotiating tactic. In addition to his universal import tax, Trump’s targeted tariffs against Mexico on auto parts would run up against NAFTA. There does not seem to be any obvious mechanism in international law to compel Mexico to pay for a border fence, either, or to justify new tariffs in response.
“It’s absurd,” Scott said. “If we want restrictions on the border, its our problem, not their problem.”
Current tariff rates, which vary from product to product, are far lower than Trump’s various proposals – the average U.S. tariff on imports from World Trade Organization members was 3.4% in 2013 and even lower when weighted to reflect which goods were imported. Assuming Trump succeeded in getting his plans past Congress, countries would be free to challenge the tariffs as a trade violation, and experts believed an international arbiter would almost certainly take their side. If Trump refused to back down, world leaders would then be free to raise their own tariffs in retaliation, setting the stage for a trade war that could strain foreign relations and depress American exports.
There is some dispute, however, over the legality of Trump’s 25% tax on China, which he told CNN in 2011 was intended to punish the country for artificially deflating its currency to encourage exports. AEI’s Barfield told msnbc there currently is no legal framework to punish currency manipulation, which is one reason critics of China’s alleged practices have been pushing (so far unsuccessfully) to demand one in the Trans-Pacific Partnership. Scott, on the other hand, made the case that the U.S. has authority to impose blanket fees on Chinese goods by declaring a balance-of-payments crisis in response to America’s large trade deficit. New York Times columnist Paul Krugman proposed a temporary surcharge on Chinese goods in 2010, noting that President Nixon briefly imposed a 10% tax on imports in 1971 to confront currency issues with economic rivals like Germany and Japan. “It has to be tied very directly to ending China’s behavior,” Scott said. While the current web of trade agreements and treaties would bar Trump from most of his agenda, he has suggested he could use his superior business acumen to convince the rest of the world to accept a new framework instead. “The biggest thing we have to do is new trade agreements,” Trump said in an appearance on MSNBC’s “Morning Joe” in June. “China is killing us, Mexico is killing us, Japan is killing us. Everybody is beating us. We have incompetent people negotiating trade. We are losing money at every single step. We don’t make good deals anymore.” A spokeswoman for Trump did not respond to a request for an interview with the candidate on the topic or an email requesting further details on his proposals.
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