U.S. President Donald Trump today announced a new wave of tariff rates targeting multiple countries. An analysis by Cable News Network (CNN) finds that while Trump’s tariff policies have produced some political and economic victories in their early stages, the long-term goals he hopes to achieve are mutually contradictory and unlikely to be fully realized through tariffs alone.
The report states that Trump’s overall tariff policy seeks to accomplish four main objectives: revitalize American manufacturing, increase U.S. government revenue, balance America’s trade deficit, and force trade partners to enact policies favorable to the U.S.
In the first few months after taking office, Trump made progress with tariffs. Some companies announced investments in U.S. factories, tens of billions of dollars in tariff revenue flowed into the U.S. every month, the U.S. trade deficit in April was halved, and many countries began negotiations with the U.S.
However, the report points out that these signs of success may just be the initial reaction of companies, consumers, and the business community rapidly adjusting to the reality of steep U.S. tariffs, rather than true long-term effects.
Regarding the revitalization of manufacturing, Trump advocates supporting job growth by reducing domestic taxes and imposing higher tariffs on imported goods.
The report notes that companies like Apple and General Motors have indeed announced plans to invest in U.S. factories. But many companies state that those investment decisions were made before Trump announced additional tariffs.
Shortage of Manufacturing Labor in the U.S.
Furthermore, the U.S. faces a significant challenge in the shortage of manufacturing labor. A May report from the U.S. Department of Labor pointed out that there are 414,000 job openings in manufacturing, but the country lacks enough workers who are willing and technically qualified for these jobs. U.S. labor costs are higher than in other countries; some industry experts estimate that if the iPhone were produced in the U.S., its price would skyrocket.
Meanwhile, manufacturing employment in the U.S. has not flourished. In fact, the opposite is true.
In the first two months after Trump took office, the U.S. added 9,000 manufacturing jobs; but over the following two months, about 7,000 manufacturing jobs were lost each month. “Currently, the total number of manufacturing jobs in the U.S. is lower than when Trump first took office.”
If Companies Produce in the U.S., the Government Receives No Tariff Revenue
The report points out that in the end, tariffs may successfully encourage manufacturing in some areas, but Trump has stated that if companies produce in the U.S., they are exempt from tariffs; this means that if companies actually move all production back to the U.S., the government would collect no tariff revenue.
In terms of increasing U.S. government revenue, Trump claims tariffs will generate trillions of dollars in revenue for America.
Trump once said: “We will make a lot of money, and then we will cut taxes for the American people.”
The report analyzes that the U.S. government currently earns about $3 trillion a year from income tax, while the U.S. imports about $3 trillion in goods annually. Deutsche Bank chief economist Slok points out that this means if tariffs were to fully replace income tax revenue, the tariff rate on all imports would have to be at least 100%.
However, as product prices rise, consumer demand decreases. Thus, Slok estimates that to truly replace income tax revenue with tariffs, the tariff rate might need to be as high as 200%. Current tariff revenues are nowhere near that scale.
Trade Deficit Does Not Equal Economic Loss
On balancing the U.S. trade deficit, the report notes that Trump often calls the trade deficit a “loss,” but most economists believe trade deficits do not equal economic losses; instead, they can indicate strong domestic demand. If the trade deficit keeps shrinking, it might actually signal that Americans’ purchasing power is declining.
On the 7th, Trump announced a new round of tariffs on multiple countries, to take effect August 1. The report analyzes that this final deadline may be to give these countries more time to negotiate, but this approach does not always work.
Moreover, once trade partners compromise, tariffs may have to be lifted, which would also undermine the U.S. government’s goal of increasing tax revenue through tariffs. For Trump to realize all of his goals appears to be impossible. (News Source: Central News Agency)