Trump is trying to use tariffs to impose his will on the economy. It doesn't work like that.
Starting Thursday, the United States will levy significantly higher tariffs on imports, he declared, a minimum of 10 percent and in some cases higher based on what other countries charge on US products. Goods from the European Union will face a 20 percent tariff and Chinese goods will be hit with a 34 percent tariff. All foreign-made automobiles will be subject to a 25 percent tariff, he said.
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Those tariffs and ones already in place will cause prices here to rise in the short term, economists said. But consumers, business owners, investors, and foreign officials don't fall under Trump's executive authority. And he can't order people to keep buying goods with a stroke of his pen.
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And they've already shown that they won't bow to Trump's dictates on the economy.
In recent weeks, major stock indices have tumbled while consumer and business confidence has declined after Trump increased tariffs on certain imports, such as aluminum and steel, and vowed that other higher tariffs were on their way. Major trading partners struck back, levying their own tariffs on US exports.
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All the uncertainty and fears of a major global trade war have led
'
Trump, who was elected in large part on his promise to immediately reduce high prices, has seen his approval rating on the economy drop.
The tariffs announced Wednesday are only going to make matters worse for Trump, at least in the short term, economists said, because they are paid by US importers when foreign goods enter the country. Those businesses usually pass the higher prices on to customers.
'The initial concern is that prices are going to rise on a lot of goods very quickly,' said Republican strategist Doug Heye. 'For
The political risk was evident Wednesday
night, when
by the Republican-controlled Senate was a rebuke to Trump
just hours after his tariff announcement, even if it is likely to stall in the House.
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'We have support left, right, and center, because people don't want Americans to have to struggle to pay more for groceries, pay more for building supplies, pay more for apple pie, for God's sake,' Virginia Democratic Senator Tim Kaine, the measure's sponsor, said Wednesday. He said
Democrats are pounding away at Trump's failure to bring down prices
so far,
and the price increases expected from the new tariffs, which they've labeled the equivalent of a new national sales tax.
'This is not 'Liberation Day.' It's 'Recession Day' in the United States of America,' House Democratic Leader Hakeem Jeffries told reporters Wednesday. 'That's what the Trump tariffs are going to do — crash the economy.'
Tariffs traditionally have not boosted domestic production or economic growth, in part because other nations usually respond with their own tariffs. A global trade war caused by the Smoot-Hawley Tariff Act in 1930 helped turn a steep recession into the Great Depression.
'In his first term, the bulk of the [cost of] tariffs were borne by American consumers,' Zandi said of the more limited tariffs Trump imposed after he first took office in 2017. '
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The uncertainty about the tariffs has led to a selloff in financial markets. Trump's announcement Wednesday won't end the uncertainty because he could change them at any moment and his use of emergency powers to impose them could be challenged in court.
Trump is very cognizant of the stock market, even boasting on Wednesday about how well it did during his first term, so a negative reaction could lead him to back down as he did in January, said Jack Ablin, chief investment officer at Cresset Capital, an investment advisory firm.
'I don't think President Trump wants to have a recession or a bear market named after him,' Ablin said. 'So I think he's paying attention.'
Trump has acknowledged
Still, Americans aren't sold on tariffs helping their economic situation. A
'He's playing with political fire because he's already in a downward trajectory' on the economy in the polls,' said Democratic strategist Simon Rosenberg. 'He promised he would lower prices and he's betrayed that promise and I don't think voters are going to respond to these actions favorably.'
Trump has argued Americans needs to put up with some short-term pain for long-term gain. The problem is, economists say there's unlikely to be any long-term economic gains from the tariffs.
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'You can't change the laws of economics,' Zandi said. 'You can influence it, but you can't change it with an executive order.'
Jim Puzzanghera can be reached at
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