New Trump tariff policies are ill-conceived

Keeping his campaign promise, United States President Donald Trump unleashed his tariff agenda almost immediately after assuming office. For imports from China, an extra 10 percent tariff was introduced on top of the existing ones, and the de minimis exemption for Chinese products was revoked, only to be restored. However, these new measures are neither well-founded, nor will they prove to be any good for the US.

One reason for Trump to raise tariffs — one that may find some support from economic theory — is that tariffs could bring manufacturing back to the US. Trump likes to liken himself to the 25th US President William McKinley, who imposed high tariffs to protect domestic industry and took land from foreign countries. In the second half of the 19th century when McKinley lived, the US was a "developing" country that struggled to catch up with the industrial powers in Europe, so the so-called infant industry theory would have applied. The US was a latecomer and tariff protection could help the country quickly build up its own production capacities. However, the US economy is in a very different state today.

The US became an industrial powerhouse and a leader in technological progress a long time ago. Today, the growth of the US economy almost totally depends on the productivity growth of its high-tech industries. While some competitors do exist elsewhere, the seven US tech giants — Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla — dominate the world. Their markets are global and do not need protection of tariffs. Other US high-tech companies, for example, those in the pharmaceutical sector, do face international competition. These companies heavily rely on imported goods to make their final products. High tariffs hurt instead of protecting them.