CNN
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President Donald Trump said high tariffs could be here to stay and he’d declare “total victory” if import taxes were as high as 50% a year from now, according to an interview with Time released Friday.
Trump has placed historic tariffs on a wide variety of imports, including a 10% tariff on virtually everything coming into the United States. He has also imposed 25% tariffs on steel, aluminum, autos and many items from Mexico and Canada. But by far the most significant trade action is a tariff of at least 145% on most Chinese goods imported to the United States.
Combined, America’s effective tariff rate now stands at 22.8%, according to Fitch Ratings. That’s by far the highest of any developed country in the world.
As a result, trade has slowed significantly with other countries, immediately punishing importers, exporters and small businesses who have to pay the high tariffs. Trump on Wednesday in the Oval Office said trade with China has slowed to effectively zero as a result of America’s significant tariffs and China’s retaliatory levies.
Soon, warehoused goods that were brought in ahead of tariffs will run out and businesses will have difficult decisions to make: import goods at more than twice the cost or stop selling them, leaving some shelves bare for consumers.
Meanwhile, businesses say they are uncertain of how to invest for the future and many have stopped hiring, according to the Federal Reserve’s Beige Book — a periodic survey of American business leaders that came out Wednesday. The word “uncertainty” appeared in the report 81 times, a record.
So the reckoning for consumers is coming soon if historic tariffs remain in place.
But Trump says high tariffs would help America. In his Time interview, which took place Tuesday, Trump said tariffs will make the country rich.
“The country will be making a fortune,” Trump told Time, claiming businesses will reshore production to the United States, adding jobs and investment — a theory debunked by a large number of businesses and economists. “Oh, zero would be easy, but zero, you wouldn’t have any companies coming in. They’re coming in because they don’t want to pay the tariffs.”
That plan faces extreme challenges, including training American workers who have been hesitant to take factory jobs (the United States has nearly half a million open factory jobs it can’t fill, according to the Department of Labor’s latest job openings report). Also, tariffs themselves have made factory construction significantly more expensive. And even if businesses wanted to reshore production, that process can take years.
Trump, in his interview and repeatedly in public appearances, has said America is taking in billions of dollars a day from tariffs. The Treasury reports that the figure is in the hundreds of millions of dollars. Regardless, those tariffs are paid by American importers, not the target countries. Those costs are then passed down the supply chain, ultimately to consumers, who should expect to pay higher prices soon, economists argue.
That’s why consumer sentiment has plunged near an all-time low, and companies across virtually all industries are sounding the alarm bell on tariffs, pulling their forward-looking profit and sales guidance because consumers are reining in their spending.
However, Trump said his administration is rapidly constructing hundreds of deals that could improve trade fairness with foreign nations and bring manufacturing to the United States.
“You have to understand, I’m dealing with all the companies, very friendly countries. We’re meeting with China. We’re doing fine with everybody. But ultimately, I’ve made all the deals,” Trump said. “I’ve made 200 deals.”
The number of deals the president and his administration says are in place or in the works is in constant flux, but Trump said in his interview that he’ll announce those deals “over the next three to four weeks.” On Wednesday, Trump said he’d announce those deals in two to three weeks.
But the deals Trump is talking about still include tariffs, taking into account non-tariff trade blockers like value added taxes, US military support and other financial arrangements with countries that the president believes are unfair.
“We’re a department store, a giant department store, the biggest department store in history,” Trump told Time. “Everybody wants to come in and take from us. They’re going to come in and they’re going to pay a price for taking our treasure, for taking our jobs, for doing all of these things.”
Although Trump in recent days has signaled that he would be open to a slight cooling off of tensions with China, in particular, he claims the impetus wasn’t the market meltdown that has wiped trillions of dollars of wealth off the value of the US stock market and sent the Treasury bond market into chaos.
“The bond market was getting the yips, but I wasn’t,” Trump said. “Because I know what we have. I know what we have, but I also know we won’t have it for long if we allowed four more years of the gross incompetence.”
