Trump's team may whittle down his most controversial tariff plan
President-elect Donald Trump’s team is reportedly looking to cut down on his plan to slap every other country with massive tariffs of up to 20%, which investors have called the “greatest risk” for the U.S. economy.
The Washington Post, citing three people familiar with the matter, reports that Trump’s aides are exploring ways to narrow down his tariff plans to only cover critical imports. Although it’s still unclear how his plans could change, any alterations would walk back one of Trump’s more controversial economic promises.
“I think we should have a ring around the collar,” Trump told Fox Business in August 2023, when he first proposed universal tariffs. He proposed baseline tariffs of as low as 10% and as high as 20% on the campaign trail.
According to the Post, Trump’s team is considering tariffs on a number of key sectors where the president-elect wants to make the U.S. dominant. That could result in tariffs on imports related to defense manufacturing, such as steel and iron, and energy production, such as batteries, solar panels, or critical minerals. Medical supplies like syringes and needles could also be hit with tariffs, the Post reports.
Those tariffs would more closely mirror Trump’s prior brushes with tariffs during his first administration. In 2018, Trump ordered large tariffs on Chinese products, including 30% on solar panels and electric vehicles, followed by 25% tariffs on steel and 10% on aluminum from most countries. Only Canada and Mexico were spared from those tariffs.
Read More: Trump isn’t backing down from his tariff tough talk: ‘We have to take it seriously’
In a statement posted on his Truth Social on Monday, Trump said the Post’s report “incorrectly states that my tariff policy will be pared back” and is “wrong.”
It’s uncertain how Trump’s universal tariffs, even a whittled-down version of them, would play into his various other tariff plans. After winning the presidential election, Trump threatened to hit Mexico, China, Canada, the BRICS geopolitical coalition, and the European Union with tariffs unless they complied with his varying demands.
Trump had threatened China with tariffs of as much as 60% prior to his additional threat of a 10% duty on all imports unless China worked to keep fentanyl from flowing into the U.S. President Joe Biden kept some of Trump’s tariffs during his administration, and last year added major duties to Chinese electric cars, medical supplies, semiconductors, and critical minerals for batteries.
“Tariffs are a — properly used, are a very powerful tool, not only economically, but also for getting other things outside of economics,” Trump said last month.
Goldman Sachs (GS) believes that a sweeping tariff would temporarily raise inflation to around 3% at its peak and could shave as much as 0.75-1.25 percentage points off GDP growth, depending on whether it is offset by other tax cuts. On Monday, the bank noted that the report suggests Trump’s team is attuned to and concerned by the risks of surging inflation.
Although many business leaders doubt Trump will follow through on all of his tariff threats, major corporations can’t entirely write them off after his first term in office.
That’s led some to begin stockpiling imported goods and preparing plans to shift their supply chains to avoid countries likely to be hit by his more isolated threats. Many are planning to pass at least some of the buck along to consumers while absorbing enough of the extra cost that customers don’t ditch the product altogether.
“There is no way that any company can absorb those kind of tariff increases,” Compass Diversified Holdings (CODI) CEO Elias Sabo said last fall during an earnings call.
