Former President Donald Trump recently pledged to enact a universal 10% tariff on all imports if he regains the presidency. His adviser Larry Kudlow argues the revenue would pay down the national debt, level America’s tariffs with those of other countries, and counter Chinese currency manipulation.
First, the national debt argument. America imported about $3.3 trillion of goods last year. Ten percent of that would be $330 billion in tariff revenue. That is a big number because it is in the same ballpark as President Joe Biden’s proposed revenue from tax increases. It is also a small number because it would cover fewer than nine months ofon the national debt. The $32 trillion of principal on the national debt would remain untouched.
A second universal tariff goal is symmetry. America has lower tariffs than most other countries. Trump and Kudlow think they should be the same. There are two ways to do this. One is for other countries to lower their tariffs. The other is to raise ours. Trump instead prefers raising tariffs to match global levels and then using that leverage to convince trading partners to lower their rates. We would then lower our rates to match in return. That’s just the GATT/World Trade Organization negotiation process but with more steps. And those extra steps sabotage the whole process.
Expanding a failed China tactic against the entire world would spark worldwide tariff retaliation, with no guarantee that it would stop with 10% tariffs from each side. If it goes multiple rounds, as with China, the universal tariff could set off a global trade war that would raise prices for everyone, choke supply chains, and risk a global recession.
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