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Yesterday’s White House announcement to impose a range of double-digit tariffs on all goods entering the U.S. from a plethora of countries will have a devastating impact on the American economy, the global economy and the rules-based international trading order. These tariffs will undermine the economic wellbeing of most Americans, the viability and profits of many businesses, and American national security.
Tariffs are taxes. Running bilateral trade deficits are not necessarily an indication of a problem or abuse and can actually show an economy is growing as it imports a lot of inputs for export. The President’s “reciprocal” tariffs will trigger significant disruptions, distortions and unintended consequences, including lost jobs in America and around the world as U.S. companies shutter overseas plants, and stop or reduce domestic production due to untenably high prices on inputs from abroad. U.S. consumers will see prices skyrocket. Since tariffs are a regressive tax, it is middle- and working-class U.S. consumers who will be hit the hardest.
The damage of “pulling the plug” on intricately crafted and delicately balanced global supply chains will be catastrophic. The losers will be American farmers, ranchers, manufacturers and suppliers who will cede market share to more reliable countries. Once those markets are lost, it will be exceedingly hard to win them back.
The economies of many poor countries will be ravaged and countries who have reached middle-income status will be thrown back into poverty, making the world more dangerous and unstable. Hard-won gains made over decades by economic engagement with the rest of the world will evaporate.
China will be a beneficiary of this new economic order because it will make the case that it is a more reliable trading and investment partner than the United States, and a cheaper supplier of most products, including autos and electronics.
Among American Leadership Initiative core principles have been economic engagement and working with allies as a means of making America more prosperous and secure. Trade, foreign assistance, and other tools of economic engagement can and have produced big wins both for the United States and much of the world. Protectionism and isolationism will only undermine America's economy and national security.
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