What Do Trump’s Tariffs Really Mean for the US Working Class?

Donald Trump’s first month in office has pummeled communities in the U.S. and across the globe with a whiplash-inducing set of illegal actions and rapid reversals. Trump’s latest about-face is on his long-promised tariffs. Shortly after announcing hefty new taxes on foreign imports, Trump placed the bulk of them on pause. For 30 days, the U.S. will delay implementing a 25 percent tariff on Mexico and Canada after the countries’ leaders agreed to boost security operations at the border. A 10 percent tax on goods from China, meanwhile, went into effect on February 4, leading China to retaliate with its own tariffs. Economists say U.S. consumers should expect to see price increases on things like imported cars, toys, clothing, home appliances, cellphones and computers.

On the campaign trail, Trump repeatedly denied that his tariff plan would lead to inflation. When ABC News asked him in September whether U.S. consumers could afford higher prices, Trump replied, “Who’s going to have higher prices is China, and all of the countries that have been ripping us off for years.”

Most economists, however, disagree. To help sift through fact and fiction, Truthout spoke with Robert Pollin, an economics professor and co-director of the Political Economy Research Institute at the University of Massachusetts Amherst.

The interview below has been edited for length and clarity.

Schuyler Mitchell: Let’s start with the fundamentals. What is a tariff? And if all of Trump’s tariffs do eventually take effect, what would be the immediate consequence for U.S. consumers?

Robert Pollin: The most immediate impact would be an increase in prices for U.S. consumers. A tariff is effectively a tax on imported goods, so if you have a tax on imported goods, somebody is going to cover those costs. You can claim that the costs will be paid by the producers in other countries, and that is formally true, but of course, the people paying the tariffs will aim to pass forward those costs, increasing the price to end up with the same net revenue.

For instance, say you’re selling knife sets at Walmart, and the knife sets cost $20, but now we have a 10 percent tariff. If the producers of the knife sets still sell them for $20, that cuts back their profit by 10 percent. They would have to pay $2 on each $20 knife set. So, instead, they would attempt to pass that cost forward by raising the price $2.

Trump has often said that China, Canada and Mexico are going to absorb these costs, not U.S. consumers. What is his support for this claim? Can you explain his reasoning?

Legally, yes, the burden falls on the seller — but of course everybody knows that’s not where things end. Where things end is where they try to pass on the cost. They may not succeed all the way. People may not be willing to pay the extra price, therefore the sellers would not try to raise it and would absorb the extra cost instead. That’s possible. But the more likely situation is that at least some significant share of that increased burden on the seller will be passed forward to the U.S. consumer.

Are there any historical precedents for tariffs of this magnitude, or any examples we can look to in history to see how something like this has played out in the past?

We have this far right, effective neofascist breaking down the neoliberal order.

Of course, there have been tariffs in the U.S. and elsewhere. The U.S. practiced tariffs pretty extensively in the late 18th century and 19th century. Tariff protection was how our textile mills got built: The idea was that the U.S. at the time was an underdeveloped country, and in order to develop it, the U.S. producers needed to be protected from foreign competition. Trump likes to invoke President William McKinley a lot, because in the late 19th century he imposed tariffs.

So, tariffs are a pretty common policy tool, but they were more frequently used in the U.S. economy in the 18th century to protect so-called infant industries and developing economies. That, I would argue, is the most credible, legitimate purpose for tariffs.

There’s not a lot of precedent recently. The more recent experience has been to eliminate tariffs and maintain relatively open trade borders. The era of neoliberalism has been characterized by globalization and the opening up of the U.S. economy to encourage free trade between countries. That was the idea, at least in principle, behind NAFTA, the North American Free Trade Agreement.

I’d love to talk some more about NAFTA and how we got to this moment. What has been the Democrats’ role in all of this? Why was Trump able to successfully step in and pitch himself as an economic populist during this last election cycle, even though it’s far from the truth?

We’re not talking about just one election. We’re really talking about the emergence of neoliberalism effectively over 50 years now, from the late 1970s, beginning with Jimmy Carter’s presidency, and moving into the Reagan and first Bush administrations. But NAFTA was enacted under Bill Clinton. It never would’ve been enacted if it had been a Republican president at the time — the Democrats would have opposed it.

That was a critical turning point. The idea then was that the Democrats were the party of free trade. But the result is that low-wage competition has contributed to keeping workers’ wages down in the U.S.

Let’s say manufacturing workers in the U.S. want to bargain for a wage increase. The capitalist now has increased credibility to say, “Oh, you want a raise? Well, I’ll relocate the plant to Mexico, where the wages are just 10 percent of what you make.” That kind of scenario acted itself out over 35, 40 years. The result is that the average worker’s wage in the United States, controlled for inflation, is today what it was in the early 1970s. There has not been a real wage increase from 50 years ago to today, even though the productivity — the amount a worker makes over the course of the day — has gone up two and a half times. That increase in productivity has been channeled instead into the incomes of capitalists and high-wage people. In the 1970s, the average CEO made about 15 times more than the average worker. Now, the average CEO makes about 300 times more than the average worker. That has been the experience of neoliberalism.

To their credit, I would argue that the Biden administration did take modest steps to reverse this trajectory. There was progress, but not nearly enough, and certainly they did not know how to communicate it. Meanwhile, Trump comes in with his whole bluster about how he’s a tough guy, everyone’s going to bow down to him, he’s going to help out the workers — and obviously it did break through. The Democrats are now portrayed as the party of middle-class professionals and people with advanced degrees.

In your analysis, what does it mean that Trump is the one enacting these tariffs, and what does that say about the current state of neoliberalism?

Well, it’s ironic in a sense that we have this far right, effective neofascist breaking down the neoliberal order. Neoliberalism, again, in principle would always favor relatively open borders and free trade. The question then is, if that characterizes neoliberalism and we don’t like neoliberalism, then why don’t we have a favorable attitude towards Trump’s tariff policies? That gets you into class analysis.

The question isn’t so much whether there are tariffs or not tariffs, but who’s benefiting from these tariffs. Of course, when Trump ran for office, he said he was for the workers and that the Democrats had abandoned them. I think it’s a fair argument to say the Democrats have, for a generation or two generations, abandoned the U.S. working class — not entirely, but significantly. We see that in terms of basic measures like income distribution and wages.

But are Trump’s policies a way to support workers? No, that’s not the case. Trump’s purpose in enacting tariffs is to defend a certain segment of the U.S. capitalist class, not the working class. That is very distinct from an argument against neoliberalism, in that neoliberalism was never so much an agenda for economic free trade as it was a very aggressive pro-capitalist approach to economic policy. Trump’s approach is also aggressively pro-capitalist, but it’s pro-capitalist within a framework of restricting trade, restricting immigration and establishing an environment in which domestic U.S. capitalists will not face challenges from foreign capitalists.

Can you talk a little bit more about why Trump’s policies don’t actually have working-class interests at heart?

Ultimately, the things that help American workers are redistributive policies that limit the power and income of capital, and labor market policies that promote unionization and enable workers to organize and bargain effectively on their own behalf. Trump, of course, favors none of these. His core agenda is going to be to lower taxes on high-income people, lower taxes on corporations and eliminate regulations. All of those things are going to not only increase income for capitalists and high-income people, but also increase their bargaining power relative to workers.

This is not a pro-worker agenda. It is an agenda that is pro-capitalist, but within a more nationalist framework than what has been true under neoliberalism. One could make the argument that limiting foreign competition and limiting the inflow of cheap imports is going to improve conditions for U.S. workers. That is conceivable, but it’s the full package of policies that establishes the relative well-being of workers. It’s not just tariffs. So, if on the one hand you’re saying, “We’re going to set up tariff barriers and limit access to the U.S. market, and U.S. workers will do better,” but on the other hand you’re saying, “We’re aggressively anti-union. We’re going to lower taxes on high-income people and cut our government programs that support working people and redistribute income downward” — that definitely is not a pro-worker agenda.

Trump’s purpose in enacting tariffs is to defend a certain segment of the U.S. capitalist class, not the working class.

What would the ideal way forward be on an economic level to support actual working-class interests? Is there a way in which tariffs could be a piece of that puzzle, in conjunction with other things, or are these sorts of tariffs detrimental regardless?

Tariffs should be understood as just one policy tool within a much broader package. Even within relations between countries, tariffs are not the only policy tool that one can use. For example, the Biden administration enacted pretty aggressive industrial policies to promote U.S. manufacturing, green investments and green industries. Those weren’t tariffs, but they were subsidies for U.S. producers. Some of this was scaled back — the Inflation Reduction Act was a scaled-back version of the Build Back Better proposal that the Biden administration initially proposed — but part of it required companies to pay decent wages and hire and train apprentice workers if they wanted to receive subsidies. So, that is another mode of addressing issues between the U.S. and other trading partners. Nothing has been formally nixed since Trump came in, but that is likely coming soon.

When we talk about tariffs as a policy within the U.S., we’re also thinking of this pretty narrowly. The U.S. isn’t the only country in the world. Do we in the U.S. only care about the U.S.? It’s true that the U.S. market has been massively beneficial to China, for example, and its development. China has succeeded miraculously since the neoliberal era. Allowing other countries to sell in the U.S. market has contributed to reducing global poverty. So, is it always a zero-sum game? If China or Mexico or Vietnam sell in the U.S., does that necessarily mean it’s going to be bad news for U.S. workers? No, not necessarily — as long as we have other policies that protect the well-being of workers, such as strong union rights, high minimum wage laws, decent living standards, and so forth.