Donald Trump’s latest tariff plan targets multiple countries. What does it mean for the US?

WASHINGTON — President-elect Donald Trump has identified what he sees as a one-size-fits-all solution to what ails America: impose massive new tariffs on foreign goods entering the United States.

On Monday, Trump sent shockwaves across the country’s northern and southern borders with a promise sweeping new tariffs for Mexico and Canadaas well as China, once he comes to power as part of his efforts to tackle illegal immigration and drugs.

In a pair of posts on his Truth Social site, Trump denounced the influx of illegal migrants, even as concerns about the southern border hovered at a four-year low.

He said he would impose a 25% tax on all products entering the country from Canada and Mexico, and an additional 10% tariff on goods from China, as one of his first executive orders.

He said the new tariffs would remain in effect “until drugs, especially Fentanyl, and all illegal aliens stop this invasion of our country!”

The president-elect claims that tariffs — essentially import taxes — will create more factory jobs, shrink the federal deficit, lower food prices and allow the government to subsidize child care.

Economists are generally skeptical and view tariffs as a largely inefficient way for governments to raise money. They are especially alarmed by Trump’s latest proposed tariffs.

Carl B. Weinberg and Rubeela Farooqi, economists at High Frequency Economics, said Tuesday that energy, auto and food supplies would be particularly hard hit.

“Imposing tariffs on trade flows into the United States without first offering alternative sources of affected goods and services will instantly raise the price of imported items,” Weinberg and Farooqi wrote. “Since many of these goods are consumer goods, so will households. made poorer.”

High Frequency Economics believes that the threats are not intended to support new trade policies, but are instead a tool to bring about some changes along the borders and for imports from Canada, Mexico and China.

Although Vice President Kamala Harris criticized Trump’s tariff threats during her failed bid for the presidency as not serious, the Biden-Harris administration maintained the taxes the Trump administration imposed on $360 billion of Chinese goods. And it imposed a 100% tariff on Chinese electric vehicles.

The United States has gradually retreated in recent years from its post-World War II role of promoting global free trade and lower tariffs. This shift has been a response to job losses in U.S. manufacturing, widely blamed on unfettered trade and an increasingly aggressive China.

They are typically charged as a percentage of the price a buyer pays a foreign seller. In the United States, tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the country.

Fare rates range from passenger cars (2.5%) to golf shoes (6%). Rates may be lower for countries with which the United States has trade agreements. For example, most goods can move tariff-free between the United States, Mexico and Canada due to Trump’s US-Mexico-Canada trade deal.

Trump emphasizes that the tariffs are paid by foreign countries. In fact, it is the importers – American companies – who pay tariffs, and the money goes to the US Treasury Department. These companies, in turn, typically pass on their higher costs to their customers in the form of higher prices. That’s why economists say consumers usually end up footing the bill for the tariffs.

Still, tariffs can hurt foreign countries by making their products more expensive and harder to sell abroad. Yang Zhou, an economist at Fudan University in Shanghai, concluded in a study that Trump’s tariffs on Chinese goods caused more than three times as much damage to the Chinese economy as to the US economy.

By raising the price of imports, tariffs can protect homegrown producers. They can also serve to punish foreign countries for unfair trade practices, such as subsidizing their exporters or dumping products at unfairly low prices.

Before the federal income tax was introduced in 1913, tariffs were a major source of government revenue. From 1790 to 1860, tariffs represented 90% of federal revenues, according to Douglas Irwin, a Dartmouth College economist who has studied the history of trade policy.

Tariffs fell out of favor as global trade grew after World War II. The government needed much larger revenue streams to finance its activities.

In the fiscal year ending September 30, the government is expected to collect $81.4 billion in fees and charges. That’s small next to the $2.5 trillion expected to come from individual income taxes and the $1.7 trillion from Social Security and Medicare taxes.