File photo / Reuters

Former President Donald J. Trump has long lied about the state of the U.S. economy under his presidency. He has repeatedly stated that the U.S. had “the best economy in the history of our country” during his term. By the broadest measure of economic achievement, average annual real GDP growth, the conservative Hudson Institute has compiled from US Department of Commerce, Bureau of Economic Analysis figures a list of eight post- World War II presidents who had better GDP growth than Trump. Johnson, Kennedy, Clinton, and Reagan were at the top of the list.

Combined with the untruths about the state of the economy under his tenure, Trump has lied about the state of the economy under the Biden-Harris administration.  He has said that Biden- Harris “destroyed the economy.” Again, using Bureau of Economic Analysis figures, the average annual real GDP growth under Biden-Harris for the non-Covid years of 2022-2024 was 2.9% as compared to an annual average annual real GDP of 2.3% under Trump for the non-Covid years of 2017-2019. For the Covid years, Trump’s lack of leadership on meeting the Covid crisis contributed to a disastrous 2020 economic performance that Biden-Harris helped pull the U.S. out of in 2021.

Having created a false narrative of a “destroyed” economy on account of foreigners’ exploitation, Trump then puts forth a trade policy prescription that doubles down on such Trump anti-foreigner verbiage as immigrants “poisoning the blood of our country,” specifically including immigrants from Asia. The basic trade policy for changing the false image of a destroyed economy back to an equally false image of a booming Trump economy is to wall-off the US economy by a 10 to 20% tariff. This tariff would apply across the board to friends like India as well as adversaries like Russia. This fits well with the Trump concept that foreign countries have taken advantage of the United States and that the country is no longer “great” because of its openness to dealing with foreigners. 

This building of a “fortress America” by use of a tariff barrier to international trade has been tried before with disastrous results for the country. In response to the stock market crash and onset of the Great Depression in 1929, President Herbert Hoover signed into law the Smoot-Hawley Tariff of 1930 which raised average duties to about 16%, although tariffs on some items were raised as high as 60%. In the words of the U.S. Senate historical blog, the tariff “proved to be a disaster”. Other countries retaliated and international trade was drastically reduced. 

In 1934, President Franklin Roosevelt signed legislation that repealed Smoot-Hawley and contributed to the New Deal attack on the depression. The Smoot-Hawley tariff damaged both the U.S. economy and the nation’s standing in the world. It was a contributing factor to the depression that swept Europe and, in turn, contributed to causing World War II. The Peterson Institute for International Economics has estimated that Trump’s tariff proposal, instead of helping the economy grow, would cut at least a percentage point off the U.S. economy by 2026.

Make no mistake, the burden of Trump’s proposed tariff would be borne by average Americans, including Indian Americans, who would have to pay for the increased cost of goods caused by the Trump tariff. Trump lies when he says foreigners will bear the cost of the tariff. As a matter of law, it is the importer who pays the tariff on imported goods, not the foreign exporter. Economists are agreed that in most cases this tariff is passed on, in whole or in part, to the consumer. Estimates vary, but virtually no economist says that the tariff would have no adverse impact on average Americans. The Peterson Institute puts the burden on the average American household at $2,600 per year with a 2% rise in inflation. Other estimates are much higher.

Trump has already called India “a very big abuser of tariffs.” Thus, it is very unlikely that Trump will provide any relief to India, as did Biden-Harris, on Trump-imposed steel and aluminum tariffs. Instead, India will be forced to retaliate, treating it as a political matter, as will most other countries. This pattern of widespread retaliation will send the world into a downward trade spiral akin to the Smoot-Hawley tariff of 1930. The adverse effects of Trump protectionism on India won’t stop at tariffs. Trump has previously campaigned against H1-b visas, characterizing then as “very bad” and taking jobs from Americans. The Biden-Harris concept of “friend sourcing” and U.S.-India cooperation on a range of economic matters including chip production will be adversely affected. 

Challenges facing the U.S. economy cannot be met by a simplistic tariff proposal that feeds into false narratives about the economy and sees foreigners as a threat. Indian Americans have contributed greatly to a growing and vibrant U.S. economic engagement with India and the rest of the world. This engagement has been a source of American and Indian strength, not weakness and in the overwhelming interest of Indian Americans. The Trump tariff proposals may be attractive for his isolationist base, but disastrous for America, Indian Americans, and India.

 

The author is Former U.S. Assistant Secretary of Commerce, Trade Development; Founding Director, U.S.-India Friendship Council.

(The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of New India Abroad)