The Potential for Trade War: Trump Proposes Tariffs

Avery Kachmarsky 

Staff Writer 

What is a tariff? According to BBC News, a tariff is a tax that is placed on internationally imported items. Countries exporting goods do not pay the tax, but rather the companies that purchase the goods. As a result, consumers may face higher prices in stores and online if companies decide to pass on the burden from boardrooms to grocery aisles and wallets.

Late last week, Donald Trump stated that he is planning on proportioning taxes that are applied on U.S. goods by other countries, per The Associated Press. These corresponding tariffs have so far been solely addressed in statements, with no order yet made. However, the possibility of a trade war between the U.S. and its trade partners, including close allies, is greatly increasing. When asked by reporters on the tariffs’ timeframe, Trump declared that he could order them at any time, whether sooner or later. 

This tax plan has foreign trade partners worrying about their economies and considering potential counter tariffs they could place on American goods, but American decision-makers are not all adverse to using tariffs. The argument for tariffs on importing items originated from voter concerns that American workers were at risk, as well as concerns about unfair trading practices from trade partners. Although these concerns are important, new tariffs may increase inflation and create uncertainties for companies, workers, and consumers, according to The Associated Press.

The main sentiment of these concerns was portrayed on both of Trump’s campaign trails, with a significant promise to his voters in early January to potentially create an agency that oversees the tariffs and income, as reported by NPR. Trump argues that domestic manufacturing would increase with the help of additional tariffs, as well as other issues including illegal immigration and drug trafficking that would be reduced. These reductions would be a result of increased tariffs on Canada and Mexico to encourage the respective leaders to maintain security and prevent illegal people and products from entering the U.S. The potential upside of tariffs would be increasing the need to buy American goods produced domestically, with increased prices on international goods forcing many to reduce purchasing from international markets. However, this may backfire on Americans if prices remain high and if international trade partners introduce their own tariffs.

Currently, Trump is proposing 25 percent tariffs on auto imports, semiconductors, and pharmaceuticals, according to Reuters, in addition to potential tariffs on lumber. The European Union has been in contact with the Trump Administration regarding the need to lower tensions and avoid a potential trade war, yet Trump has ordered additional 25 percent tariffs on steel and aluminum imports, as well as a 10 percent tariff on imports from China, as stated by the NPR, reiterating that the tariffs will encourage consumers and companies to purchase American-made goods. 

In recent days, the Federal Reserve has announced that consumer prices increased by 3 percent, with more prices on goods likely to increase, especially with the tariff on steel and aluminum. According to NPR, companies that produce cans in the U.S. for drinks and foods, including soup, are reliant on international imports. Soda companies and brewers may see a direct price increase to produce the items needed for their goods. As companies face financial burdens, so too will consumers, with grocery store prices continuing to rise with no end in sight.

According to The Guardian, Trump has stated that fixing the economy will require a primarily long-term solution, with prices increasing in the short-term. Trump has also promised that Americans will benefit from an increase in jobs, which will in turn grow the economy and increase security against problematic trade. Another potential trade war could brew between the U.S. and BRICS, an organization consisting of Brazil, Russia, India, China, and South Africa, but these tariffs would mainly be the result of efforts to weaken U.S. economic influence abroad.

With the negotiating showdown between U.S. and Russian officials over the Russian invasion of Ukraine gaining momentum, compromises may include lowering tariffs that were once placed on Russia or its allies or removing certain existing sanctions to allow Russia to come to an agreement with the U.S. on ending the war. However, the tactic of leveraging tariffs on allies or trade partners to encourage certain spending or innovation may harm the domestic economy, push potential buyers of American goods away, and strain relationships that have been forged over many years.

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