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1. Why Trump's tariff proposals would harm working Americans

Author:
Kimberly Clausing and Mary Lovely
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
At the beginning of its history, the United States relied on tariffs—taxes on imported goods—as its major source of government revenue. That changed starting in the early 20th century, with the enactment of the federal income tax and the advent of a new consensus recognizing tariffs as regressive, burdening the working class while leaving untaxed much of the income accruing to the wealthy. At present, less than 2 percent of government revenue in high-income countries comes from import taxes. Today, however, the United States may be on the cusp of reverting to an antiquated approach to funding its government. Presidential candidate Donald Trump is proposing to reduce US reliance on income taxes while increasing our reliance on import tariffs. He proposes extending expiring tax cuts from 2017 and has also suggested possible new rounds of tax cuts. At the same time, he has proposed a ten percent "across-the-board" tariff and a 60 percent or more tariff on imports from China. Together, these policy steps would amount to regressive tax cuts, only partially paid for by regressive tax increases. The tariffs would reduce after-tax incomes by 3.5 percent for those in the bottom half of the income distribution and cost a typical household in the middle of the income distribution about $1,700 in increased taxes each year. If executed, these steps would increase the distortions and burdens created by the rounds of tariffs levied during the first Trump administration (and sustained during the Biden administration), while inflicting massive collateral damage on the US economy. This Policy Brief leverages recent research to provide approximate calculations for the cost of the higher proposed tariffs to US consumers, considering the distribution of these costs across US households and the consequences for US federal revenues. In sum, Trump's tax proposals entail sharply regressive tax policy changes, shifting tax burdens away from the well-off and toward lower-income members of society while harming US workers and industries, inviting retaliation from trading partners, and worsening international relations.
Topic:
Elections, Tax Systems, Trade Policy, Donald Trump, and Protectionism
Political Geography:
North America and United States of America

2. Export Controls Game: Rethinking Global Integration

Author:
Sangjun Yea
Publication Date:
07-2024
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The article discusses how geopolitical interests are influencing trade policies and global supply chains, leading to a reevaluation of international relationships. The U.S. and China are specifically highlighted, with the U.S. implementing export controls on semiconductors to prevent China's military advancement, while China responds with its own export restrictions on essential raw materials. Using a game-theoretic model, the study illustrates how countries use export control measures to balance security interests and economic benefits, ultimately impacting the global semiconductor supply chain and production decisions of multinational corporations.
Topic:
Exports, Trade Policy, Economic Integration, Supply Chains, and Semiconductors
Political Geography:
China, Asia, North America, and United States of America

3. Time to Reset the U.S. Trade Agenda

Author:
Peter Harrell
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
The strongest argument for rebooting U.S. trade policy ultimately may not be geopolitics, nor even the economic argument that trade deals will help an already-strong U.S economy. Instead, the best argument is that trade is a key element of solving global challenges that affect us all, like the green energy transition and the risks of AI and the digital economy.
Topic:
Treaties and Agreements, Geopolitics, Digital Economy, Artificial Intelligence, Trade Policy, and Green Transition
Political Geography:
North America and United States of America

4. Mistaken Identities Make for Bad Trade Policy

Author:
Maurice Obstfeld
Publication Date:
10-2024
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Election season debates over trade policy have brought renewed attention to the United States' longstanding deficit in foreign trade. Critics from both the right and left sides of the political spectrum, including Donald Trump and his allies, hold the trade deficit responsible for a range of alleged ills, among them, slower US economic growth, fewer jobs, the decline in manufacturing, and a transfer of American wealth to foreign owners. Trump supporters' ideas to reduce US trade deficits, such as far-reaching taxes on international transactions or forced dollar devaluation, rest on particular theories of why the deficits have arisen and persisted. These theories often have little basis other than macroeconomic accounting identities—relationships that are always true, by definition, and that therefore are consistent with a range of economic outcomes. Two key macroeconomic identities, the national income and product identity and the balance-of-payments identity, have been widely abused as justifications for radical policies to balance US trade. The identities describe relationships that necessarily hold among macro variables, but without the further input of behavioral reasoning, they cannot yield valid predictions or constructive policy conclusions. Identity-based reasoning is especially dangerous because it disguises the collateral damage that superficial fixes may inflict. It is much better to identify and directly correct the distortions that cause excessive trade deficits to emerge and persist.
Topic:
Elections, Macroeconomics, Trade Policy, Donald Trump, and Trade Deficit
Political Geography:
North America and United States of America

5. The Regressive Nature of the U.S. Tariff Code: Origins and Implications

Author:
Lydia Cox
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Tariffs are often thought of as taxes that fall uniformly across goods or industries. In reality, however, the U.S. tariff schedule is extremely complex—the modern‐​day tariff code comprises 4,394 pages of tariffs on 19,347 varieties of goods. As a result, there is a lot of variation in tariff rates, even within narrowly defined categories of goods. We study this complexity through the lens of a little‐​known but consequential pattern in the modern U.S. tariff schedule: tariff rates are systematically higher on low‐​value versions of goods relative to their high‐​value counterparts. For example, the tariff on a $400 handbag made of reptile leather is 5.3 percent, while the tariff on an $8 plastic‐​sided handbag is 16 percent. Through a comprehensive analysis of U.S. tariffs over the past 100 years, we show that this regressive pattern is, and has been, a systematic feature of tariffs for decades. Our findings are emblematic of a more fundamental feature of U.S. tariff policy: tariffs set to meet policy objectives of the past have persisted through vast changes in the economic landscape and, despite their historical origins, are still affecting consumers today.
Topic:
Economics, Tariffs, and Trade Policy
Political Geography:
North America and United States of America

6. US Trade Policy Options for Pacific Islands States Require Washington’s Political Commitment

Author:
Marcus Noland
Publication Date:
07-2023
Content Type:
Special Report
Institution:
East-West Center
Abstract:
The Pacific Islands have emerged as a zone of contestation in the ongoing rivalry between China and the United States. While the US has long been the dominant military power in the region, China is raising its profile through activities like port visits, military exercises, and establishing diplomatic and security ties with regional states like Kiribati and the Solomon Islands. In 2018, Chinese leader Xi Jinping visited Papua New Guinea for the Asia Pacific Economic Cooperation (APEC) summit. President Biden was supposed to visit PNG in May 2023, in the first ever visit of a sitting US president to the Pacific Islands, but that trip was scuttled due to the debt ceiling fiasco in Washington. In the economics sphere, the US has attempted to counter China’s Belt and Road Initiative (BRI) together with Japan and Australia through the Blue Dot Network and the Indo-Pacific Infrastructure Trilateral to promote high-quality, transparent, and sustainable infrastructure development. The region contains considerable natural resources, and the US has been working with Pacific Island nations to promote sustainable resource management, in contrast to China’s alleged illegal, unreported, and unregulated fishing in the Pacific. What has been missing, however, is a trade policy component to the US strategy to counterbalance China’s exploration of a free trade agreement with the Pacific Islands Forum (PIF).
Topic:
Foreign Policy, Economics, Politics, and Trade Policy
Political Geography:
China, North America, United States of America, and Pacific Islands

7. A New Horizon in U.S. Trade Policy: Key Developments and Questions for the Biden Administration

Author:
Trevor Sutton and Mike Williams
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
Center for American Progress - CAP
Abstract:
This issue brief examines some of the key trade initiatives pursued by the Biden administration to date. It then sets out key questions facing U.S. trade policy in a global environment defined by volatility and renewed ambition to tackle the great challenges of the 21st century, such as climate change, inequality, and great power competition.
Topic:
Foreign Policy, Climate Change, Treaties and Agreements, European Union, Inequality, Economy, Trade Policy, and Strategic Competition
Political Geography:
Europe, North America, Asia-Pacific, United States of America, and Americas

8. Despite disruptions, US-China trade is likely to grow

Author:
Megan Hogan and Gary Clyde Hufbauer
Publication Date:
10-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The United States and China hit record trade levels in 2022, despite a prickly relationship, suggesting that calls for severe or even total economic decoupling between the world’s two economic superpowers may be ill-advised, say Hogan and Hufbauer. The dollar value of US-China trade grew significantly between 2019 and 2022, notwithstanding declines in trade flows of certain products such as semiconductors and aircraft due to the trade war. The persistence and even growth of the two countries’ total trade despite political and economic disputes reflects the mutual benefit that private firms see in this commercial relationship. The authors conclude that partial decoupling between the United States and China has not, so far, redrawn the world trade map. Nor does it seem likely to do so on an aggregate trade basis between now and 2025.
Topic:
Foreign Policy, Bilateral Relations, Trade Policy, and Semiconductors
Political Geography:
China, Asia, North America, and United States of America

9. America's payoff from engaging in world markets since 1950 was almost $2.6 trillion in 2022

Author:
Gary Clyde Hufbauer and Megan Hogan
Publication Date:
12-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
International trade may not be as popular in the United States as it once was, but this updated PIIE study demonstrates that the payoff to the US economy from globalization has been significant. Gains from trade since 1950, facilitated by vastly improved transportation and communications, added up to $2.6 trillion in 2022, lifting US GDP by 10 percent. These gains averaged $7,800 per person and $19,500 per household in the United States in 2022. Despite these gains, trade barriers were erected under former president Donald Trump and continued under the Biden administration, spurred by concerns over trade-related job loss. These protectionist policies, coupled with the global financial crisis and the COVID pandemic, have slowed globalization. To be sure, trade has inflicted losses on certain US workers. Between 2001 and 2016, more than 300,000 workers annually lost or switched jobs because of imports. In comparison, more than 50 million workers change jobs each year. Americans enjoy large but less visible gains from trade through cheaper and more varied products and increased productivity at firms. Instead of restricting trade, US policymakers should adopt better safety nets for displaced workers and ensure that economic growth is more widely shared.
Topic:
Globalization, Markets, Labor Issues, Economic Growth, and Trade Policy
Political Geography:
North America and United States of America

10. Reimagining the TPP: Revisions that Could Facilitate U.S. Reentry

Author:
Wendy Cutler and Clete Willems
Publication Date:
12-2022
Content Type:
Special Report
Institution:
Asia Society
Abstract:
Since the United States withdrew from the Trans-Pacific Partnership (TPP) in 2017, countries in the Asia-Pacific have actively concluded trade deals without the U.S. This includes China, which is a member of the Regional Comprehensive Economic Partnership (RCEP) and has recently applied to join the TPP, now known as the CPTPP. These developments have increased the urgency for the United States to step up its economic engagement in the world’s fastest-growing region. The Indo-Pacific Economic Framework for Prosperity (IPEF) is a useful step in this direction, but countries in the region are clamoring for more. A return to CPTPP would provide an immediate boost to U.S. economic competitiveness and geopolitical influence. However, many concerns about the original TPP are legitimate and U.S. trade policy views have shifted since the agreement was concluded. A new report by the Asia Society Policy Institute titled Reimagining the TPP: Revisions that Could Facilitate U.S. Reentry aims to start a meaningful conversation about potential U.S re-entry into the CPTPP based on extensive consultations and important input from a broad range of trade experts, domestic stakeholders, and CPTPP members. It offers recommendations for improvements and updates to the agreement in 12 areas needed to meet U.S. economic interests and facilitate U.S. re-entry.
Topic:
Economy, Trans-Pacific Partnership, and Trade Policy
Political Geography:
North America and United States of America