Raising tariffs on US goods may hurt the economy, but can Trump push them through anyway?
US President-elect Donald Trump – who during the campaign called tariff “the most beautiful word in the dictionary” – wasted little time after his election win before proposing even more stringent tariffs on US trading partners.
Trump’s campaign promises included adding a 10 percent to 20 percent tariff on all non-domestic goods sold in the United States, a 60 percent tariff on goods from China and reciprocal tariffs on nations that impose tariffs on the US. Then, on November 25, Trump promised new 25 percent tariffs on goods from Mexico and Canada and an additional 10 percent tariff on China.
Economists say that Trump following through on these promises could reactivate inflation, a key issue Trump rode to victory in the 2024 election.
Our review of academic studies of real-world tariffs concluded that consumers ultimately shoulder most of the burden in higher prices for goods, and the burden outweighs tariffs’ economic benefits. There is near consensus among economists on this question, surveys show.
Independent groups have estimated that Trump’s proposed tariffs would cost a typical family from $2,000 to $4,000 annually, estimates that were calculated before the most recent tariff proposals.
If fully applied, the new North American tariffs could raise grocery prices, given that Mexico accounted for 69 percent of US vegetable imports and 51 percent of fresh fruit imports in 2022. New tariffs on Canada could also spike gasoline prices, especially in the upper Midwest, which relies on Canadian crude oil imports. Construction prices could rise, too; one-quarter of the lumber used in the US comes from Canada, and both Canada and Mexico supply cement, metals, machinery and other home-building necessities.
Supply chains for these and other goods could not quickly switch to domestic sources, which would force consumers to pay more or skip buying what they don’t absolutely need.
If Trump wants to follow through on the tariffs, there may be no way to stop him. Experts say he could act unilaterally, without support from a Congress that’s perhaps more ambivalent about tariffs than he is. Agricultural states, which hold significant sway in the Senate, worry about retaliatory tariffs by US trading partners that could blow up longstanding export markets.
“There appear to be few practical or legal barriers to Trump making good on his campaign promise,” concluded trade specialists Warren Maruyama, Lyric Galvin and William A Reinsch with the Center for Strategic and International Studies, a think tank focusing on national security.
Trump’s track record on tariffs
A tariff is, in effect, a tax on imported goods. More than a century ago, tariffs accounted for most of the federal government’s revenue, but in recent decades, domestic taxes have become the primary federal income source. After 70 years of international negotiations to promote free trade, tariffs have recently hovered at about 2 percent of total federal revenue, according to the Congressional Research Service.
After Trump was elected in 2016, he unilaterally ordered tariff increases, totalling an estimated $80bn, on items such as steel, aluminium, washing machines, solar panels and a variety of goods from China. As a result, foreign tariffs collected by the federal government doubled between 2015 and 2020, to $74bn. When Joe Biden defeated Trump in 2020’s presidential election, Biden retained many of Trump’s tariffs.
It remains to be seen whether Trump intends to follow through or whether raising the spectre of tariffs is a tactic to win concessions from those countries.
What powers could enable Trump to impose tariffs without Congress?
According to Article 1, Section 8 of the Constitution, Congress holds the power to impose tariffs, not the president.
However, over the years, Congress has passed multiple laws ceding some of that power to the president.
“Legally, there is no distinction between Congress imposing tariffs and a president who imposes tariffs operating within law,” said Ross E Burkhart, a Boise State University political scientist specialising in trade.
Tariff-applicable powers available to Trump include:
Section 232 of the 1962 Trade Expansion Act, which lets the president impose tariffs if national security is threatened. Trump has already used this authority for his steel and aluminium tariffs, some of which Biden retained.
“While some argue that it would be a stretch for Trump to claim that all imports are a threat to US national security under Section 232, the courts have routinely deferred to presidents on foreign affairs and trade policy, and legal challenges to the Section 232 tariffs haven’t gone anywhere,” Maruyama, Galvin and Reinsch wrote for the Center for Strategic and International Studies.
Section 301 of the 1974 Trade Act, which allows tariffs when the president determines that a foreign country “is unjustifiable and burdens or restricts United States commerce” through violations of trade agreements. Trump used this authority for some of his first-term tariffs on China and on civil aircraft from the European Union; Biden used it for tariffs on Chinese electric vehicles and other technology products.
Section 301 requires a determination by the Office of the US Trade Representative; Section 232 requires an investigation by the Commerce Department. But “these procedural niceties could be accomplished in relatively short order by cabinet officials,” Maruyama, Galvin and Reinsch wrote.
Tariffs on China would be “easiest to impose” using Section 301 authority, said Douglas Irwin, a Dartmouth College economist.
Burkhart said: “Congress is unlikely to raise a great deal of objection to tariffs on China. The public tends to view China’s trade policies with the US as being unfair, which makes this an easier tariff to implement.”
Section 338 of the 1930 Tariff Act, which hasn’t been used for decades but which could allow the president to place up to a 50 percent tariff on foreign goods if the US International Trade Commission finds that the foreign country has used unfair trade practices against the US.
Section 122 of the 1974 Trade Act, which allows the president to add a 15 percent tariff on imports for 150 days given “large and serious” deficits in the US balance of payments with other nations or to prevent “an imminent and significant depreciation of the dollar” in foreign exchange markets.
Section 203 of the International Emergency Economic Powers Act, which allows tariffs on all imports during war or an emergency. Declaring such an emergency would require only an executive order from Trump. Trump threatened to use this authority in 2019 against Mexico, citing illegal immigration into the US, but later that year, the two countries came to an agreement on immigration policy that headed off its use.
Alan Wm Wolff, a Peterson Institute for International Economics senior researcher, has written that an overly broad application of Section 203 – to “allies and friends in Europe and Asia, in the Americas – would be “too large a power grab to have been within what Congress intended in this statute”.
But Maruyama, Galvin and Reinsch argued that the law’s language is broad enough to fit Trump’s needs. “It is not a stretch” to imagine Trump expanding the law to address large US trade deficits, they wrote.
What leverage do tariff opponents have to fight them?
These five provisions allow Trump substantial leeway on trade policy – and there’s no surefire way to stop him, experts said.
Tariff opponents could sue, but legal challenges would face “a steep uphill climb”, Maruyama, Galvin and Reinsch wrote. “The courts, including the Supreme Court, traditionally have been reluctant to interfere with the president’s exercise of foreign affairs and tariff powers.”
The US Court of International Trade rejected some of Trump’s unilateral tariff proposals in his first presidency, but it’s unclear how that court would rule on these new proposals, Kent Jones, a Babson College emeritus economics professor, said.
US trading partners could challenge Trump’s policies at the World Trade Organization, the international arbiter for trade, but this hasn’t swayed him. “President Trump has often stated that he does not consider WTO rules or any other trade agreements to be binding on the US, and this consideration would be unlikely to constrain his decision to impose unilateral tariffs,” Jones said.
Congress could pass legislation to limit Trump’s tariffs or use the threat of doing so as leverage. If the tariffs are as broad and deep as Trump has recommended, deep-pocketed businesses might press lawmakers to oppose them.
“The sheer magnitude of a global tariff will make businesses squeamish,” Burkhart said. “These are large lobbying constituencies on Capitol Hill, and they will surely make a lot of noise when a global tariff is proclaimed by President Trump, no matter the legal circumstances under which such a tariff is justified.”
However, both the Senate and the House have Republican majorities. And Trump could strategically exempt certain companies to divide and weaken his opposition.
“By playing favourites on tariff exemptions, the government can distribute rewards to friendly or compliant companies,” Jones said.
The most likely, and potentially most effective, response would be for foreign countries to raise their own tariffs on US goods, ratcheting up the economic pain for the US.
Widespread economic damage, particularly from inflated prices, could lead to an electoral reversal of fortune for Trump and might be the only lever that works in the end, experts said.
“The biggest pushback against unilateral, across-the-board tariffs would likely come from US consumers and US retailers and distributors that purchase the imports, since their prices are likely to jump significantly, probably by close to the full amount of the tariffs,” Jones said.