'Severe economic downturn': Why MAGA’s pro-tariff arguments 'will backfire'

17 January

President-elect Donald Trump and others in the MAGA movement are arguing that tariffs will encourage U.S. manufacturing, benefit the economy, and promote job creation. Trump is proposing 25 percent across-the-board tariffs on all goods imported into the United States from Mexico and Canada, and he favors aggressive tariffs with products manufactured in Mainland China as well.

In an op-ed published by Politico on January 15, Matthew C. Klein — co-author of the 2020 book "Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace" — lays out some reasons why the tariffs Trump is proposing will not create the U.S. manufacturing renaissance he says they will.

Klein makes it clear that he is "sympathetic" to Trump's complaints about the decline of U.S.-based manufacturing, which, the author says, threatens the U.S. from both a "prosperity" standpoint and a "national security" standpoint. And he acknowledges that "the global trading system has failed many workers in the U.S. and elsewhere."

But Klein is highly critical of the tariffs Trump is proposing, arguing that the president-elect "needs to think harder about the tools he wants to use" and avoid creating a "severe economic downturn."

"Several of the policies Trump and his advisers have floated — primarily universal tariffs — risk making things worse, or, at best, will do nothing to revive American manufacturing or improve the lives of its workers," Klein warns. "Prosperity is not zero-sum, and just because we inflict pain on trading partners doesn't mean we'll benefit. More likely, punitive measures will backfire."

According to Klein, the "net effect" of tariffs "depends on how easily American workers and factories can ramp up production of goods that are currently imported."

"For goods where U.S. demand is relatively low but domestic capacity is rising rapidly thanks to government subsidies, such as battery electric vehicles, the benefits of tariffs could outweigh the costs," Klein explains. "At the other extreme would be tariffs on imports of goods where demand is strong and domestic capacity is extremely constrained, such as coffee beans. There, tariffs would be closer to a sales tax that takes money from American consumers to reduce the federal budget deficit."

Klein adds, "In the middle are goods that Americans could make more of, but only by moving workers and machines away from other activities: more U.S.-made t-shirts, but fewer childcare workers. Unfortunately, the incoming administration does not seem to appreciate these nuances."

Matthew C. Klein's full Politico op-ed is available at this link.

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