'Will backfire': Expert warns Trump missing vital 'nuances' of key agenda vow

President-elect Donald Trump’s tariff plan could backfire, wrote Matthew C. Klein for Politico Magazine, potentially achieving the opposite of his intentions.

Trump is already planning massive new tariffs on China, Canada, and Mexico; economists have broadly warned his schemes could lead to steep price hikes.

Ultimately, wrote Klein, Trump is trying to fix a real problem: America's struggle to retain competitiveness in manufacturing.

"Since 2000, production has fallen between 10 percent and 30 percent in many strategically significant industries, including machinery, electrical equipment, chemicals and metalworking. While output has held up better in some other categories, such as motor vehicles, aircraft, pharmaceuticals and semiconductors, the modest growth in U.S. production has been dwarfed by the surge in both domestic and global demand. If current trends continue, even those industries that survived the losses of prior decades could end up displaced by producers in hostile countries."

The problem, Klein continued, is that Trump's tariffs aren't going to fix this problem — and overly punitive tariff schemes "will backfire."

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"Tariffs are taxes paid by importers on goods coming across the border," wrote Klein — something Trump appears to be confused about. "They can make U.S.-made goods look relatively cheaper — to Americans, anyway — compared to foreign-made goods. In theory, that would boost employment, wages and profits for American manufacturers compared to a world with no tariffs. But those gains would only come at the cost of forcing American consumers to spend more money to buy the same (or fewer) goods, which would mean there is less money available for everything else."

Trump, not understanding these "nuances," misses the bigger picture, he continued.

"Imposing 'universal' tariffs high enough to force those imports to fall by more than 40 percent to close the trade deficit would likely involve a severe economic downturn that hurts Americans more than anyone else. To avoid that pain, domestic production of those same goods would have to rise enough to cover the gap — and rise fast enough to prevent shortages and inflation. The experience of the pandemic suggests that this is not a realistic option."

Ultimately, Klein wrote, what probably will happen is "countervailing forces would prevent tariffs from doing much at all — just like the last time Trump was in office." And at the end of the day, "Slapping tariffs on other countries’ goods and gutting his predecessor’s achievements might delight Trump in the moment, but they’ll only make it harder for him to make American manufacturing great again."