“A cordon around the country.” Trump insists on tariffs to protect the US, not afraid of inflation

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Donald Trump is determined to impose blanket tariffs on imports into the United States of 10 percent, and a special tariff of up to 60 percent on imports from China, after possible re-election in the November elections.

Given the tight race between Trump and the current White House tenant, Democratic President Joe Biden, Trump’s reasoning should be taken seriously. The Czech medical equipment manufacturer Linet is doing the same, whose boss told Seznam Zprávy last week that if Trump wins, the company would seriously consider moving part of its production to the United States.

“It is obviously a very fair alternative that we will have to deal with. And of course, what we make there, we won’t make here,” Tomáš Kolář said in an interview.

Trump revisited the tariff plan in a wide-ranging interview published by Time magazine this week. According to the former president, fears about the strengthening of inflation are odd, and a higher rate on general imports than the mentioned 10 percent is also considered.

“It’s a cordon around the country. Also reciprocal tax. If we do that, the numbers are huge. I don’t believe it’s going to have any particular impact because they’re making a lot of money off us,” Trump said in an interview that lasted more than an hour.

“I don’t even believe that prices will rise by that much. A lot of people say ‘It will be like a tax on us’. I do not believe it. It is a tax only against the country that does it. I got billions of dollars from China. No one else has ever done anything with China,” Trump said, referring to the tariffs his administration imposed midway through his 2017-2020 first term.

In January 2018, Trump announced tariffs on steel and aluminum imports from selected trading partners, and special tariffs on a number of Chinese products. The goal was to reduce the trade deficit, restore industrial jobs, and protect American intellectual property.

Beijing then quickly responded, raising tariffs on many US products, including agricultural and food products – in some cases as high as 25 percent. This hit American farmers hard, with their exports falling by $27 billion between mid-2018 and the end of 2019.

Tariffs were not neutral for ordinary Americans either. According to calculations by the nonpartisan Tax Foundation, Trump’s measure stripped $80 billion from household incomes, as if he were imposing a new tax on them. The most lasting impact was precisely the increase in prices. However, according to Trump, there is no need to worry about the acceleration of inflation.

“I don’t believe it will lead to inflation. I think it will be loss limitation for our country. Other countries do it with great success … They want to pay you a lot if you want to enter (the market there),” Trump said. In addition to China, he also mentioned India, France and Brazil by name.

“But if you want to build a factory here, that’s fine, you employ our people. That’s basically what I do,” Trump said.

Chinese companies are already looking for ways to avoid possible tariffs or other barriers, and their attention is mainly focused on the southern neighbor of the United States, Trump’s “favorite” Mexico.

They follow the path of so-called nearshoring, i.e. moving production to a country adjacent to the market where they want to penetrate more easily. Trump’s tariffs should not apply to goods manufactured in this way, even in branches of Chinese companies, if Washington did not want to risk a trade war with Mexico.

This, on the other hand, could benefit from the tension between the world’s number one and number two, as up to one million jobs could be created here, which would only benefit the Mexican economy.