Trump Threatens To Pull The U.S. Out Of The World Trade Organization
Donald Trump on Sunday threatened to pull the United States out of the World Trade Organization (WTO) if his plan to tax imports of U.S. companies that move their operations abroad is foiled.
The Republican presidential nominee called the international trade body a “disaster” and ratcheted up his anti-trade criticism in calling for the punishment of U.S. firms that move overseas.
He also doubled down on his push to either renegotiate or withdraw the United States from all of their global agreements, including the North American Free Trade Agreement and the 12-nation Trans-Pacific Partnership.
“There will be a tax to be paid,” Trump told Chuck Todd in an interview on NBC’s “Meet the Press.”
Trump has vowed to impose tariffs — in the range of 15 percent to 35 percent — on companies like Indiana-based Carrier, which is moving its operations to Mexico.
“If they’re going to fire all their people, move their plant to Mexico, build air conditioners, and think they’re going to sell those air conditioners to the United States, there’s going to be a tax,” he said.
When Todd said the import-tariff plan wouldn’t pass muster at the WTO, Trump said that is “even better.”
“Then we’re going to renegotiate or we’re going to pull out,” he said.
“These trade deals are a disaster,” he said. “You know, the World Trade Organization is a disaster.”
When Todd told Trump that his plan would rattle the world economy much like Great Britain’s exit from the European Union has done, the New York businessman didn’t retreat from his hard-line trade stance.
“We’re going to do it. We’re going to do it,” Trump said.
Ed Gerwin, a trade policy analyst with the Progressive Policy Institute, said Trump’s latest trade ideas, “even by his standards, are insane.”
“They would bring about unprecedented global economic chaos, plunge the U.S. into recession and destroy millions of good jobs,” Gerwin said. “They’d make Brexit look like an English garden party.”
Gerwin called Trump’s trade proposals “not only wrongheaded, but they’d be a bureaucratic nightmare.”
“Withdrawing from the WTO would turn the U.S. into the economic equivalent of North Korea — walled off from the global economy,” Gerwin said.
He added that any move to exit the trade body would allow 160 countries to “immediately slap high tariffs and other trade barriers on U.S. exports, putting at risk the millions of good jobs that depend on U.S. exports.”
A WTO exit also runs counter to Trump’s plans to punish China for trade violations, a big focus of the trade arm of his campaign, Gerwin noted.
“Withdrawing from the WTO would also cut the U.S. off from the WTO dispute settlement process, which the U.S. has used with considerable success to get China to change unfair trade practices,” he said.
“All of this is deeply ironic, given that Trump also says he wants to be tougher on China trade and given that Trump also says that he’d eliminate foreign duties on products like U.S. beef the day he gets into office,” he added.
Trade experts argue that raising taxes on companies or countries that Trump deems as violators of trade rules would only hurt U.S. consumers by pushing up prices on imported goods.
The comments created an instant backlash from trade experts on Twitter.
Scott Lincicome, a trade attorney, wrote: “I know trade is complicated, boring, & politically toxic, but Trump’s WTO threat is the econ equivalent of his NATO comments, maybe worse.”
In another tweet he said: “And, of course, withdrawing the US from the WTO would very likely collapse the global economy, crippling US biz, workers, consumers (esp poor).”
(h/t The Hill)
As president, Trump could not be able to create these tariffs by himself. Article I, Section 8, Clause 1 of the United States Constitution, authorizes Congress to levy taxes. Most of Trump’s threatened tariffs would violate decades of binding trade deals negotiated by previous administrations and agreed to by previous Congresses. However rather than looking into the legality, we will instead explore Trumps question who should care if there is a trade war.
Trump proposed a 35% tariff on American companies who outsource manufacturing outside of the United States and then ship the products for sale back home. A tariff is a tax on an imported good that is passed on to consumers, both individual and businesses. That’s right, you the consumer will pay Trump’s 35% tax which means you will pay more for the products you buy every day.
For example Forbes estimates Trump’s tariff plan would cost American consumers an extra $6 billion dollars per year just on Apple iPhones alone.