How potential Trump tariffs could affect US trade relations

In his first term, Donald Trump famously raised tariffs on Chinese goods, but what will he do in his second term?

Raymond Robertson is director of the Mosbacher Institute for Trade, Economics, and Public Policy at the Bush School of Government at Texas A&M. He joined Texas Standard to discuss tariffs in Donald Trump’s second term. Listen to the interview above or read the transcript below.

This transcript has been edited lightly for clarity:

Texas Standard: I recalled earlier this year that President Biden started imposing tariffs on Chinese electric vehicles (EVs). Am I missing something? I think they were like 100% 

Raymond Robertson: Yes, and that has been the strategy of the Biden administration. And we expect a continuation of high tariffs and anti-trade policies in the next administration as well. The Biden and Trump trade policies are actually almost very similar.

Well, that’s interesting because I think a lot of people are talking about how Trump’s anticipated use of tariffs would raise prices for Americans and that, generally speaking, tariffs are not seen as a very effective way. In fact, it can be a counterproductive tool when it comes to trying to improve the economy. 

That’s absolutely right. And one of the main reasons for that is that we are planning on putting tariffs on intermediate goods where people use those things for production in the U.S.

So if the cost of these inputs go up, that means we’re not going to need as many workers to put those things together so it actually can hurt employment in the long and the short run.

So why are people so focused on this tariff issue if, in fact, as I hear you saying here, Trump’s approach seems to very much mirror Biden’s?

Yeah, I think that people are very focused on it because Trump has been much more aggressive with wanting to impose tariffs not just on China, but on everyone in the world. And the level of tariffs he wants to impose are much higher.

So the economic implications, although the policies are similar, the economic implications are going to be much larger because Trump’s tariffs are bigger and more widely applied.

Well, when we talk about this more widely applied use of tariffs, I hear Mexico could be on the receiving end here.

Yeah, and that would be a big problem for Texas because Mexico is the number one trading partner. And we import and export lots of goods. And a lot of the Texas economy depends on our trade with Mexico.

And so imposing those tariffs on Mexican goods is going to hurt Texas employment and push up prices, specifically in Texas.

And I think more specifically, a lot of people think of auto production as Detroit, but in fact, Mexico is a huge part of that chain.

Absolutely. Their number one export has been cars and car parts for many, many, many years. In fact, I mean, more than 20 years.

And they’re closely linked to, obviously, the economy in Detroit, but also the economy in Texas, because auto producers in Texas rely on parts coming from Mexico to finish those cars. And so if the prices of those inputs goes up, that’s going to mean there’s going to be either higher prices for the cars or fewer workers needed to make the cars in Texas and Detroit.

How likely is it that we might actually see a tariff war or a trade war erupt [with] Mexico now being the number one trading partner with the U.S.? 

Well, it’s almost certain.

I mean, the new president of Mexico, Claudia Sheinbaum, has the kind of attitude where she’s not as pro-free trade as some of her predecessors. And she’s very likely to impose retaliatory tariffs against the United States. And that’s kind of her position, her administration.

So it’s very likely we would see a trade war and that would just cause harm on both sides of the border and make both countries worse off.

And I would imagine you are thinking about how a lot of workers at some of these factories in San Antonio, in the Dallas-Fort Worth area, [this] could have a major impact on their livelihoods.

Actually, yes, I think that’s very much a possibility, and I’m very worried about that. And that’s why we want to try to promote trade with Mexico in order to keep jobs flowing in the United States.

We’re actually part of one economy. Texas and Mexico are part of a single labor market and we depend on each other. And so putting up barriers is going to make both sides worse off.

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