Title: President-elect Donald Trump’s View on Tariffs as a Tool for Economic Leverage
President-elect Donald Trump views tariffs as a strong weapon to apply pressure on countries to address issues related to drug trafficking, immigration, and threats to the US dollar’s dominance. He has repeatedly touted his tariffs as the “greatest thing ever invented.” This high-risk, high-reward strategy is intended to build maximum pressure on other nations, forcing them to come to the negotiating table.
There is some justification for using tariffs as a bargaining chip, even though it can lead to higher prices for consumers and potential trade wars. For instance, the United States imports approximately $3 trillion worth of goods each year, and the threat of tariffs can create leverage on countries whose economies would suffer if they suddenly couldn’t sell goods to Americans. As Stephen Moore, former senior economic adviser, emphasized, “It’s a dangerous game, one that could work.”
Tariffs have been employed by the Trump administration in various negotiations. For instance, tariffs on imported steel and aluminum led to deals with Canadian and Mexican companies. Trade officials also see tariffs as a means to pressure Mexico, Canada, and other countries to address legitimate concerns like drug trafficking.
Yet, there are also reservations about the use of tariffs as a tool. It’s possible that concessions granted to the United States don’t fully address the problem or are even less favorable than they seem. Another potential cost of using tariffs is a loss of trust among friends and allies, making it challenging to develop and maintain alliances in the long term.
Additionally, some experts worry that relying on tariffs may lead to national security issues, the erosion of manufacturing industries, and a surge in domestic prices. Christine McDaniel, a senior research fellow at the Mercatus Center, cautioned that “Tariffs can buy some industries more time, but you end up hurting more people than you help, and it’s only temporary. Sooner or later, the global market conditions catch up with you.”
Former President George W. Bush’s trade official, David York, emphasized that threats of tariffs have more emotional than economic appeal. Eric York, a senior economist and research director at the Tax Foundation, concurred that tariffs rarely result in real concessions from trading partners. “They offer something that sounds nice on paper and makes for a good photo op. The tariffs never go into effect, and Trump gets to declare he’s the master negotiator.”
Furthermore, as Karoline Leavitt, spokesperson for Trump’s transition team, highlighted in an interview with CNN, President Trump views tariffs as a means to restore domestic manufacturing and address economic priorities, such as job re-shoring and wage inflation.
Despite potential risks and criticisms, some argue that tariffs can still be utilized to achieve important objectives like combating drug trafficking. A threat of tariffs can concentrate minds and push countries towards action. According to Stephen Moore, “If we can’t trade with Mexico, we would survive. But it would be the end of the world for Mexico. That does give us leverage. And leverage is everything when you’re negotiating.”
In the end, while tariffs might offer Trump an effective negotiating tool to some extent, their value depends on a careful cost-benefit analysis and balancing economic, diplomatic, and political considerations.
