Expert: Trump Victory Would Mean Supply Chain Panic
Predictions of inflation and lost exports if Republican presidential nominee Donald Trump re-wins the White House and imposes global tariffs are well-trod ground.
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But Wendy Edelberg, director of The Hamilton Project and a senior fellow in economic studies at the Brookings Institution, said not enough attention has been paid to how such tariffs would affect businesses as the country transitions from roughly two-thirds of imports entering duty free to all imports facing at least a 10% duty, and all Chinese imports facing at least a 60% duty.
"Even if Trump doesn't really mean it, it's just a negotiating tactic," and he says would impose them in March, not January, the effect on supply chains will be immediate, Edelberg said during a Hamilton Project forum last week. If the former president is reelected in November, she said, she expects importers in December to start importing to stockpile to get ahead of the tariffs before Trump would take office in January.
A Brookings post she wrote with Maury Obstfeld, Peterson Institute for International Economics senior fellow, said: "What should worry us just as much [as the macroeconomic effects], however, is the prospect of near-term chaos. Every importer and every purchaser of imported intermediate goods would shift attention from day-to-day business needs in their scramble to renegotiate contracts, reconfigure supply chains, and lobby for tariff exemptions -- all in an uncertain, highly politicized trade environment. Thanks to the [COVID-19] pandemic, we know what our economy looks like when supply chains are massively disrupted: Product costs spike, and shelves are empty. Why on earth would we want to repeat that mess?"
Obstfeld noted during the panel discussion that the scale of the 10% universal tariff and additional 60% tariffs on Chinese goods is more than eight times larger than his last trade war.
Panelist Jason Furman, a former director of the Council of Economic Advisers under Obama, said the only thing worse than across-the-board tariffs are across-the-board tariffs that can be avoided if top company officials sweet-talk the president, and he exempts them.
The panelists said businesses aren't yet preparing for the tariffs. "I've heard a surprising amount of denial," Furman said, with executives saying it's just campaign talk.