Universal Tariffs are Universally Bad

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In his first term, Trump used his executive power to kick off a massive trade war with China while tearing up or renegotiating existing trade deals to significantly increase US protectionism. The Biden administration has maintained much of that trade-skeptical attitude, carrying over many of the trade restrictions first implemented by Trump while passing their own tariffs on EVs, batteries, steel, and more.

Yet for his second term, Trump is proposing further trade restrictions that make the near decade-long trade war look like a tempest in a teapot by comparison. His explicit plan calls for a universal tariff on all US imports (of between 10% and 20%) plus larger tariffs on Chinese imports (60% or more), and reciprocal tariffs on nations that tax US exports. Beyond these initial policies, continuous escalation of tariff rates is frequently an implicit or explicit policy goal and Trump often personally threatens other large tariffs on specific countries, industries, and companies. The entirety of the last eight years of trade wars have driven average effective US tariff rates—the amount of customs duties paid as a share of total imports—up from 1.6% in 2017 to 2.6% in 2023. Trump’s plans promise to at least quadruple that tax rate, and possibly increase it by 7 times its current levels or more. There is simply no modern precedent for US tariff rates anywhere close to that high.

Moreover, Trump’s tariff plans would also be out of step with policy in all of the world’s prosperous high-income nations—most countries with effective tariff rates near the levels he is proposing are pariah oil producers or struggling low-income agricultural economies. No strong major global economy functions with tariffs that high because the consequences would simply be so overwhelmingly negative—the closest analog to the size and scope of Trump’s proposals are the infamous Smoot-Hawley tariffs that contributed to the Great Depression.

Universal tariffs as high as Trump is proposing will substantially increase prices—US consumers will bear the brunt of inefficient taxes on a wide variety of basic foods and essential goods that physically cannot be produced stateside, with the poorest households being hit the hardest. American industry will struggle amidst higher costs for key intermediate supplies, machinery, and equipment, dwarfing any marginal benefits