via Mike Shedlock:
In a recent interview with Larry Kudlow on Fox news, Trump proposed a “ring around the collar” of the U.S. economy, “When companies come in and they dump their products in the United States, they should pay, automatically, let’s say a 10 percent tax. That money would be used to pay off debt.”
Trump’s $300 Billion Tax Hike Would Threaten U.S. Businesses and Consumers
The Tax Foundation reports Trump’s $300 Billion Tax Hike Would Threaten U.S. Businesses and Consumers
In 2022, we bought more than $3.2 trillion worth of goods from other countries; imposing a new 10 percent tax on our purchases would raise U.S. taxes by more than $300 billion. It would create what Trump describes as a “ring around the U.S. economy” to discourage foreign companies from selling to U.S. consumers under the unfounded hope of boosting domestic production.
But rather than boost domestic production, the new tax would harm the U.S. economy through various possible channels.
One is through higher prices. Higher input costs for businesses lead to reduced production, and in turn, lower wages and profits. They can also lead to higher consumer prices, which reduce the value of our incomes because we can’t afford to purchase as much.
Another is through currency appreciation. A stronger dollar would help offset the price increases for U.S. consumers, but it would make it harder for exporters to sell their goods abroad. Again, the result is lower incomes for workers and business owners.
Whatever channel the tariffs take, Americans become poorer. In turn, the actual revenue collected by the government would be less than $300 billion because other tax revenues would fall.
Using Tax Foundation’s general equilibrium model, we estimate a new 10 percent tariff on all imports would reduce the size of the U.S. economy by 0.7 percent and eliminate 505,000 full-time equivalent jobs.
Unfortunately, that would be the tip of the iceberg. Imposing an across-the-board tariff would threaten the entire system of global trade we currently enjoy.
U.S. exports totaled $2.1 trillion in 2022. If the rest of the world responded to the new tariff in kind, it would amount to $200 billion of new taxes for foreign governments. We estimate that would further reduce U.S. GDP by 0.4 percent and eliminate another 322,000 full-time equivalent jobs.
Taken together, we find Trump’s proposal of a 10 percent trade tax matched with in-kind retaliation would shrink the U.S. economy by 1.1 percent and threaten more than 825,000 U.S. jobs.
Trump Tweets “Trade Wars are Good and Easy to Win”
2018 Hoot of the Day
On March 2, 2018 I noted Trump Tweets “Trade Wars are Good and Easy to Win”