While running for president, Donald Trump made no secret of his disdain for many current trade agreements and promised to bring manufacturing jobs back to the United States from nations that outsource production, like China and India. After he won, he embarked on a protectionist campaign, threatening substantial fines over alleged intellectual property theft and significant tariffs.
In early 2018, the Trump administration began imposing tariffs, not only on strategic adversaries such as China, but also on long-standing allies such as Canada, Mexico and Denmark. Although Chinese officials have retaliated with their own duties, U.S. levies have had an impact on the Chinese economy, hurting manufacturers and causing a slowdown. In late 2018, the two nations seemed to reach a truce, with each country pledging not to impose new taxes.
However, in recent months, Beijing has stepped up its offensive against the United States by deploying export controls on critical minerals central to global manufacturing (such as rare earths), as well as announcing retaliatory tariffs. While China’s economy is still weak, its leaders have shown they are willing to endure pain to pursue their vision of a self-reliant industrial structure less dependent on property investment and foreign technology.
The escalation in the trade war may have consequences that will be felt by all Americans. However, the biggest costs will fall on those who buy imported goods. A February 2020 study in the Quarterly Journal of Economics found that importers largely pass the cost of tariffs on to consumers, who pay about 3 percent of the price of an imported good when the tariff is fully implemented. These consumer costs are likely to be concentrated among lower-income households, as the US tariff code is regressive.