Trump's First Term Prices: What They Could Tell Us About This Term

WASHINGTON (AP) Donald Trump loved using tariffs on foreign goods during his first presidency. But their impact has been barely perceptible on the overall economy, although their repercussions have been evident in specific sectors.

The data shows they never fully delivered on the promised factory jobs. Nor did they cause the avalanche of inflation that critics feared.

This time, however, its tariff threats could be different.

The president-elect is talking about going much further, on a potential scale that creates more uncertainty about whether he will do what he says and what the consequences might be.

There's going to be a lot more tariffs, I mean, that's pretty clear, said Michael Stumo, CEO of the Coalition for a Prosperous America, a group that has supported import taxes to help the domestic manufacturing industry.

The president-elect announced on social media Monday that on his first day in office he would impose 25 percent tariffs on all products imported from Mexico and Canada until those countries satisfactorily end to illegal immigration and the flow of illegal drugs such as fentanyl into the United States. .

These tariffs could essentially blow up the North American trade deal that Trump's team negotiated during his first term. But on Wednesday, Trump posted on social media that he had spoken with Mexican President Claudia Sheinbaum and that she had agreed to end unauthorized immigration across the border into the United States.

People shop at a Walmart supermarket in Secaucus, New Jersey, July 11, 2024. (AP Photo/Eduardo Munoz Alvarez, File)

People shop at a Walmart supermarket in Secaucus, New Jersey, July 11, 2024. (AP Photo/Eduardo Munoz Alvarez, File)

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Trump also announced Monday that Chinese imports would be subject to additional 10% tariffs until Beijing takes action against the production of materials used to make fentanyl.

Democrats, business groups warn of risks from Trump's tariff threats

Business groups were quick to warn of a rapid escalation in inflation. House Democrats have drafted legislation to deprive the president of the ability to unilaterally implement such drastic tariffs, warning that they would likely lead to higher prices for automobiles, shoes, housing and goods. 'grocery store.

Sheinbaum initially said Wednesday that his administration was already preparing a list of possible retaliatory measures if the situation got to that point. Likewise, the Canadian government also began considering retaliatory tariffs if Trump took action.

House Democrats introduced a bill Tuesday that would require congressional approval for a president to impose tariffs due to claims of a national emergency, a largely symbolic action given that the Republicans take control of the House and Senate.

This legislation would allow Congress to limit this broad emergency authority and establish the congressional oversight needed before a Democratic or Republican president can indiscriminately increase costs on the American people through tariffs, said Rep. Suzan DelBene, D-Wash.

Shipping containers are stacked at a port in Tianjin, China, January 16, 2023. (AP Photo/Mark Schiefelbein, File)

Shipping containers are stacked at a port in Tianjin, China, January 16, 2023. (AP Photo/Mark Schiefelbein, File)

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But for Trump, tariffs are now a proven tool that seems less politically controversial, even though the mandate he received in the November election largely involved controlling inflation.

The tariffs he imposed on China during his first term were continued by President Joe Biden, a Democrat who even extended tariffs and restrictions to the world's second-largest economy. Biden administration officials considered removing Trump's tariffs to reduce inflationary pressures, but found they were unlikely to provide significant help.

The tariffs were so new and unique that they freaked everyone out in 2017, Stumo said, but they are now considered part of the policy toolbox of the United States and other countries.

Trump's first-term tariffs had a modest impact on the economy

Trump imposed tariffs on solar panels and washing machines in early 2018, measures that could have raised prices in those sectors, although they also overlapped with plans to open washing machine factories in Tennessee and South Carolina.

His administration also imposed tariffs on steel and aluminum, notably against its allies. He then raised tariffs on China, leading to a trade conflict and a limited 2020 deal that failed to produce promised Chinese purchases of U.S. goods.

President-elect Donald Trump speaks during a House GOP conference meeting, November 13, 2024, in Washington. (AP Photo/Alex Brandon, file)

President-elect Donald Trump speaks during a House GOP conference meeting, November 13, 2024, in Washington. (AP Photo/Alex Brandon, file)

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Nonetheless, the dispute changed relations with China as more U.S. companies sought alternative suppliers in other countries. Economic research also found that the United States may have sacrificed some of its soft power as China's population began watching fewer American films.

The Federal Reserve kept inflation about where it expected, but factory construction spending never increased in a way that would suggest a lasting gain in manufacturing jobs. Separate economic research found that the tariff war with China did nothing economically for communities affected by offshoring, but it helped Trump and Republicans in those communities politically.

When Trump first became president in 2017, the federal government collected $34.6 billion in customs, duties and fees. That sum more than doubled under Trump to $70.8 billion in 2019, according to Office of Management and Budget records.

Although this sum may seem significant, it was relatively small compared to the overall economy. The gross domestic product of the Americas now stands at $29.3 trillion, according to the Bureau of Economic Analysis. Total tariffs collected in the United States would amount to less than 0.3% of GDP.

Trump wants much more ambitious tariffs in the future

The new tariffs proposed by Trump are now considerably higher and their impacts could be much greater.

If Mexico, Canada and China faced Trump's proposed additional tariffs on all goods imported into the United States, it could amount to roughly $266 billion in tax revenue, a figure that assumes no disruption of trade or any retaliation by other countries. country. The cost of these taxes would likely be borne by American families, importers, and domestic and foreign businesses in the form of higher prices or lower profits.

Prime Minister Justin Trudeau, left, answers a question as Ontario Premier Doug Ford looks on following the announcement of plans to transform Nokia's Ottawa facility into a technology center for research and development in Ottawa, Ontario, Monday, October 17, 2022. (Adrian Wyld/The Canadian Press via AP, File)

Prime Minister Justin Trudeau, left, answers a question as Ontario Premier Doug Ford looks on following the announcement of plans to transform Nokia's Ottawa facility into a technology center for research and development in Ottawa, Ontario, Monday, October 17, 2022. (Adrian Wyld/The Canadian Press via AP, File)

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Former Biden administration officials said they were concerned that businesses could take advantage of Trump's tariffs if they were imposed to justify raising their prices. This would reflect price increases for many companies in 2022, made possible by Russia's invasion of Ukraine, which drove up food and energy prices and gave companies the opportunity to further increase their own prices.

I'm very concerned about the total indiscriminate tariffs on more than just China that they're offering to companies to raise prices, said Jen Harris, a former Biden White House official who is now director of the Economy and Society Initiative at the William and Flora Hewlett Foundation. .

But what Trump hasn't really explained is what might lead him to abandon the tariffs and declare victory. What he's creating with his tariff threats is a sense of uncertainty as businesses and countries wait for the details to understand what it all might mean.

We know the key economic policy priorities of the new Trump administration, but we don't know how or when they will be addressed, said Greg Daco, chief U.S. economist at EY-Parthenon.

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AP writer Mark Stevenson contributed to this report from Mexico City.

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