Howard Lutnick, Donald Trump’s choice to be commerce secretary, suggested at a news conference with Trump on Monday that “reciprocity” would be the watchword for the new administration’s trade policy. The president-elect agreed: “If they tax us, we’ll tax them the same amount.”
It’s an attractive idea. It sounds fair, and frames the alternative as letting other countries take advantage of us. “Our country loses to everybody,” Trump groused to the gathered media. Even free traders might think reciprocal tariffs are a useful tactic to get other countries to let in U.S. exports.
But the idea has a track record, as does Trump. Those records belie the sales pitch.
Trump’s premise — that we practice free trade while other countries tax our products — is false. Scott Lincicome, a policy analyst at the libertarian Cato Institute, points out that dozens of countries have lower average tariffs than the United States does. Former senator Patrick J. Toomey (R-Pennsylvania), writing in the Wall Street Journal recently, noted that Canada, Britain and Europe “all impose lower taxes on American manufactured goods than the [United States] imposes on comparable imports.”
We have particularly high tariff rates for some industries. We hit European trucks with a 25 percent tax, for example, while the European Union taxes U.S. trucks at 10 percent.
That 25 percent tariff is left over from a trade dispute we had with European countries all the way back in the 1960s. It was a response to their tariffs on U.S. chicken exports, which is why it’s sometimes called “the chicken tax,” as Trump noted during his last presidency. There are a few takeaways from that history. One is that “bargaining chip” tariffs have a way of sticking around long after everyone has forgotten their supposed point. Another is that Trump’s enthusiasm for tariffs is not limited to retaliatory ones: When he talked about our high tax on imported trucks in 2018, he was praising it.
During his first term, he also touted a bill in Congress that proposed giving him the authority to raise any tariff to mirror that of another country. However, the bill would have given him no authority to drop tariffs to another country’s lower level. Trump didn’t seem to mind.
During this year’s presidential campaign, Trump repeatedly talked about setting a minimum tariff of 10 percent or more on all imports. That’s a policy that has nothing to do with reciprocity. It would apply to Britain, which has an average tariff of 3 percent on U.S. exports. And to the E.U., which has a 4.5 percent average tariff on products from the United States.
Trump remains proud of the tariffs he imposed on imported steel and aluminum during his last term. He took credit for them at Monday’s news conference. Those tariffs weren’t a response to other countries’ tariffs, either.
The man just likes tariffs. They don’t have to be a response to other countries’ trade barriers to win his support, and they don’t have to win tariff-lowering concessions from them to keep his support. And to be fair, why should he want to limit tariffs in that way? If it really were true that tariffs will “make our country rich,” as he also said on Monday, it would be irresponsible not to raise them.
Whether tariffs will have such positive effects is something nearly all economists doubt, but that’s a debate we can have. “Reciprocity” is a distraction: Trump doesn’t take it seriously — and neither should anyone else.