Trump’s Trade Policy Is Really Just a Tax Increase

Donald Trump was on 60 Minutes Sunday night, saying things like this about trade in an interview with Scott Pelley: 

Trump: … Mexico, by the way, is taking our jobs. I love the Mexican people. They’re great people. But the leadership is too smart for our country. Ford Motor Company, moving a $2.5 billion plant to Mexico. Mexico.

Pelley: But there’s nothing you can do about that as president.

Trump: Sure there is.

Pelley: How do you keep them from exporting American jobs to Mexico?

Trump: Let’s say Ford, let’s say Ford moves to Mexico. If they want to sell that car in the United States they pay a tax. Here’s what’s gonna happen: They’re not going to build their plant there. They’re going to build it in the United States.

Pelley: But there is a North American Free Trade Agreement.

Trump: And there shouldn’t be. It’s a disaster.

Pelley: But it is there.

Trump: OK, yeah, but—

Pelley: If you’re president, you’re going to have to live with it.

Trump: Excuse me, we will either renegotiate it or we will break it. Because, you know, every agreement has an end.

Pelley: You can’t just break the law.

Trump: Excuse me, every agreement has an end. Every agreement has to be fair. Every agreement has a defraud clause. We’re being defrauded by all these countries.

Pelley: It’s called free trade—

Trump: No, it’s not.

Pelley: —and it is a plank—

Trump: It’s not the—

Pelley: —of the Republican platform.

Trump: Scott, we need fair trade. Not free trade. We need fair trade. It’s gotta be fair.

Sometimes people make things more complicated than they really are, and here I appreciate the clarity and simplicity in Trump’s statements. While others might try to obscure their proposals, Trump comes right out and says what he means.  What we have here is Trump proposing to tax imports from Mexico.  Under NAFTA, the U.S. and Mexico (and Canada) have agreed not to impose import taxes (tariffs) on each other (with a few exceptions here and there).  Trump would renegotiate NAFTA so that the U.S. could impose these taxes, at least on automobiles.

Of course, if you get rid of the trade liberalization established by NAFTA, that would also mean that Mexico could impose taxes on U.S. exports to Mexico, making U.S. products uncompetitive in that market and harming some U.S. producers.  The result of all this “fair trade” would be no net job increases, just higher taxes and higher prices for consumers.

So, the best description of Trump’s trade policy is that it’s a tax increase for everyone involved.

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