A new approach for Democrats on tariffs
Why they should stop fighting with one hand tied behind their backs.
Early this week, financial markets took a beating in the face of the Trump administration’s new tariffs on Mexico, Canada and China.
The Dow plunged by nearly 700 points on Tuesday alone, and consumers are clearly nervous.
Tariffs, as we know, are a core part of the Republican Party’s economic agenda. And while they have been rolled out in chaotic fits and starts—first they’re on, then they’re off—Trump has made it clear: As long as he’s in office, tariffs are here to stay.
Democrats (and economists) have responded by correctly warning these are, in reality, taxes that will push higher costs onto consumers. Still, I don’t think that’s enough if the Democrats are going to convince American workers they are on their side when it comes to fighting for the US economy.
Trump’s tariffs are central to his argument that he is standing up for these workers. Eventually, he says, these tariffs will convince companies to rebuild manufacturing in this country.
In places like the Midwest, this message has a lot of resonance, even though the economic evidence says it won’t work.
There might be minor victories from time to time, but the record is clear: The first Trump trade war was a bust, and the odds are that Trade War II won’t work, either. The best economic data we have says that, rather than making gains, the first-term Trump tariffs pushed higher prices on to importers and consumers, while failing to lure manufacturers back to the US. Instead, companies just rearranged their supply chains.
Yet, Trump didn’t seem to pay a price for this failure in the last election.
Kamala Harris warned repeatedly Trump’s new tariffs would raise American costs even more. Still, Trump won on the economy.
Yes, much of this stemmed from concerns about inflation, which Republicans successfully blamed on Joe Biden. But there is more to it than that.
Even though an increasing number of Americans are making the connection between tariffs and higher prices, a recent New York Times article showed tariffs rise in popularity when they’re presented as an American response to unfair trading practices by other countries, especially China. This is why you see Republicans arguing these tariffs will bring manufacturing jobs home and punish unfair competitors, while Democrats focus their attention on impending price hikes for cars, gasoline and avocados.
But it seems to me Democrats are fighting this battle with one hand tied behind their backs. They also need to convince Americans they have a better way to defend the US economy.
The reasons for the decline in American manufacturing are complex, but this much is clear: The US tax code delivers incentives to multinational corporations to locate and keep their manufacturing operations overseas, and reforms are clearly needed.
“The US tax code puts a heavy thumb on the scale in favor of foreign corporate activity,” Kimberly Clausing, a professor of tax law and policy at UCLA, wrote in the Financial Times last year. “For a US multinational, foreign income is often taxed either not at all or at a rate that is half that of the US.”
As Clausing wrote more recently, American businesses have argued they needed the advantage to compete with foreign companies that enjoyed even lower taxes elsewhere. However, former Treasury Secretary Janet Yellen helped negotiate an agreement with more than 130 countries in 2021 to fix that problem, coordinating a global minimum tax of 15% on certain companies.
Yet, Trump, among his first actions in office, signed executive orders to withdraw from the landmark agreement and to punish other countries that move forward with it.
This isn’t in the best interests of the American worker. It is the opposite.
Some Senate Democrats have proposed a plan to stop these outsourcing incentives and move toward a global minimum tax in order to stop this race to the bottom. However, I don’t believe they have emphasized it enough in countering Trump’s argument for tariffs.
They should.
Many Americans perceive, rightly or wrongly, that the US is being taken advantage of by other countries, and Trump’s tariffs play to that belief. In places like the Quad-Cities, where I live, this feeling is strong.
Unfortunately, his tariffs will raise costs (in reality, taxes) on these same American families, and he will use those revenues to help finance a $4.5 trillion tax cut that delivers most of the benefits to corporations and the wealthy. This is a distinctly anti-worker strategy cloaked in economic nationalism.
Trump’s first term made abundantly clear that tariffs were a failed attempt to defend the American economy. However, I don’t believe a compelling argument is being advanced by the left to appeal to workers who are prone to give Trump’s new tariffs another chance.
Democrats should make the case to these workers that, instead of costly tariffs, they should support reforming the tax code, so it doesn’t benefit multinational corporations at their expense.
Americans already believe the tax code is stacked against them. Fixing it is a far better way to defend the US worker than Trump’s plan to raise prices at the gas pump and the grocery store.
On Wednesday, markets calmed a bit as the Trump administration, clearly worried about the stock slide, temporarily backed off some of its tariff plans. But in doing so, they injected even more uncertainty into the economy. And as I was finishing this article Thursday, the administration was introducing even more turbulence into the situation.
The stress on our economy is showing. Consumer confidence has dropped sharply.
Democrats can address this anxiety, and perhaps even help themselves politically, by sending the message they offer a better way: That instead of imposing ineffective tariffs that hurt the American worker, Democrats will fight to bring about a fairer tax code that doesn’t protect corporate profits and might actually bring some of those overseas jobs home.
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I think Democrats need to be specific in naming the exact tax codes that benefit multinational corporations at the expense of American people, so it more concrete for us.
Trump is a master at communication with his base. It would take an equally massive communication strategy to overcome his lies, smoke and mirrors. I think what disappoints me the most is the national media does a poor job of providing the rest of the story and the only people who are actually informed are getting their news from places that already agree with their positions. On the other hand I will never watch Fox