Washington — On Wednesday, President Donald Trump made a major move by announcing the largest tax hike in the United States in at least three decades. This tax increase, amounting to over $2 trillion over the next 10 years, is a result of a new 10% tax on all imports, with higher rates on goods from several countries. In addition to the 10% tax, a 25% tariff will be imposed on all foreign cars.
During a cold and overcast ceremony in the White House Rose Garden, which was attended by members of his Cabinet and hundreds of invited guests, Trump explained his decision. “Foreign leaders have stolen our jobs, foreign cheaters have ransacked our factories, and foreign scavengers have torn apart our once beautiful American dream,” Trump said.
The 10% rate is half of the 20% Trump had initially proposed during his campaign. Nevertheless, this change will still cost American importers around $2.1 trillion in additional taxes over the next decade. According to estimates by the Tax Foundation, these costs will ultimately be passed along to consumers. Erica York, the vice president of federal tax policy at the Tax Foundation, warned that the total cost might end up being higher because the U.S. will be charging even more tariffs on certain countries.
Trump’s new tax hikes are projected to be larger than those of past presidents, which Republicans have criticized for years. These include Republican George H.W. Bush’s tax hikes in 1990, Democrat Bill Clinton’s in 1993, and Democrat Barack Obama’s in 2010, which were used to fund the Affordable Care Act.
In a controversial move, Trump is using emergency powers to bypass Congress and implement these tariffs. He has set a base tariff rate of 10%, but is charging higher tariffs for goods from certain countries based on how those countries tax U.S. imports. For example, imports from European Union countries will face a 20% tax because Trump’s advisers claim that the EU’s tariffs and “currency manipulation and trade barriers” add up to a 39% tax on American goods sold to Europe.
At the same time, the situation with Canada and Mexico, the two other countries involved in the United States’ largest free trade agreement, remains uncertain. Trump had previously imposed a 25% tariff on goods from these nations, arguing that they were allowing fentanyl to be smuggled into the U.S. However, he delayed the implementation of these tariffs for a month. The executive order Trump signed on Wednesday excludes products that are “compliant” with the trade agreement, but it does not clarify what “compliant” means.
In his speech, which lasted almost an hour, Trump repeatedly referred to his tariffs as “Liberation Day” for the country. He once again falsely claimed that foreign countries, rather than Americans, would be the ones paying these new tariffs. “We took in hundreds of billions of dollars from China in tariffs,” Trump said. “I took in hundreds of billions of dollars in my term, hundreds of billions. They never paid ten cents to any other president, and yet they paid hundreds of billions.”
This statement is not true. Economic experts during Trump’s first term had repeatedly informed him that U.S. tariffs are paid by American importers. This means that the tariffs on Chinese goods, which Trump has boasted about, were actually being paid by American consumers. It is unclear whether Trump is knowingly making this false claim or if he truly believes it, but he has continued to repeat this statement.
While Trump’s new tariffs are intended to punish foreign countries, they will likely burden American consumers, raising prices on imported goods and potentially disrupting trade relationships. The impact of these tariffs will unfold over the next decade, and how they will affect the U.S. economy remains to be seen.
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