CES panelists detail potentially damaging effects of Trump tariffs

Speaking at a CES panel on the state of global trade Wednesday evening, Erica York said it wasn’t surprising a variety of estimates about potential effects of tariffs started “with a negative sign.”

None of the business leaders nor trade experts next to her disagreed.

York is the vice president of federal tax policy for the Tax Foundation, a self-described nonpartisan Washington think tank. Her organization looked at a dozen different estimates of the impact of President-elect Donald Trump’s proposed tariffs.

“Tariffs will have a bad effect on the U.S. economy,” she said. “Some estimates even find that retaliation could double the economic impact of the tariffs.”

Throughout his campaign, Trump promised harsh tariffs on American allies and competitors alike. If he follows through after taking office on Jan. 20, he would apply a 25% tariff on Canada and Mexico while tariffing Chinese imports at 10%.

More recently, he’s added Denmark to the list, possibly hoping to coerce the country into handing over Greenland to the United States. Trump is also taking a similar route with Panama to leverage control of the Panama Canal, which the U.S. gave the country in 1999.

The incoming president has also advocated for a blanket tariff on all countries. York said a 10% tariff on goods from any country would shrink the U.S. economy by half a percent.

“That sounds small, but when you’re talking about the effects of tax policy on the economy, that’s significant,” she said. “We’re a very large economy, so that adds up to billions of dollars of annual losses, nearly double that for the 20% tariffs.”

Under just the 10% universal tariff, York said taxes would increase by $1,200 per household. Under the “full suite” of proposed tariffs, that number jumps to $3,000.

Though there’s a moratorium on tariffs for “digital trade,” Ximena Gates, the CEO of on-the-job training software company BuildWithin, said she’s worried about the impact of Trump’s tariffs on startups with online sales.

This also wouldn’t be the first time Trump got the U.S. into a trade war with China. He imposed tariffs on the country, although smaller than what he’s currently proposing, in response to “unfair trade practices” and intellectual property theft.

Now Trump said he wants to impose a tariff until China cracks down on fentanyl coming into the country. Still, James Green, who previously worked at the U.S. embassy in Beijing, said the two countries’ current relationship is “actually not that bad.”

“If you look at the incoming Trump administration, they invited Xi Jinping, the Chinese leader, to come to the inauguration,” said Green, who now works as Google’s director of government affairs. While Xi won’t be attending, “it highlights that in the incoming administration, there are folks who want to make some sort of deal.”

And many of Trump’s tariffs from his first term stayed on the books under President Joe Biden. While Trump started America’s turn toward protectionism, Biden solidified it, York said.

Part of her argument against tariffs is that they discourage innovation. Instead of competing with companies around the world on a more even playing field, American companies would be able to “enjoy higher profits just by selling into this protected domestic market,” she said.

“Firms that get protection from the government don’t turn around and plow those higher profits into (research and development),” York said. “They plow it into lobbying for protection to get it for longer and higher.”

Jake Colvin, the president of the National Foreign Trade Council, reminded the audience about the world’s interconnectedness by pointing to his socks.

The American company behind the pair makes their product in India with fair-trade, organic cotton, certified by a group in Switzerland. Then they use Shopify, a Canadian firm, to sell them on the internet.

“There’s no shunning globalization,” Colvin said. “It’s a question of whether we’re going to enable our companies to succeed at home and abroad, stand still and do nothing or put up roadblocks.”