In Critique of Trump Tariff Wars, ITIF Calls for “Strategic Trade Enforcement” Against Mercantilists, Not Indiscriminate Tariffs on Allies

July 5, 2018

WASHINGTON—As trading partners such as Canada, Mexico, and the European Union begin to impose retaliatory tariffs on the United States, a new analysis from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, offers a critique of the likely impacts of the Trump administration’s indiscriminate tariff wars and calls for a shift in policy toward “strategic trade enforcement” to address specific challenges in particular countries.

Framed as a “user guide” for policymakers, the 10-point analysis shows the administration’s tariff wars lack strategic focus, risk provoking allies to no good end, and miss an opportunity to apply targeted pressure on the countries that pose the greatest economic and national security threats to the United States, starting with China.

“The administration is right to target countries that subvert the global trade order, costing the United States tens of thousands of jobs and billions of dollars in lost economic opportunity. But the focus of U.S. enforcement action should be on the worst mercantilist nations, not the least,” said ITIF President Robert D. Atkinson, lead author of the report. “China obviously constitutes the largest threat not only to the global trading system but to U.S. innovation and national security. Rather than alienate our allies, the administration should focus squarely on those actions that push back against China’s unfair trade practices.”

ITIF’s analysis sorts through claims and counter-claims in the current tariff debate and sets the record straight on 10 important points of fact:

  1. Tariffs aren’t a cost to the economy as a whole; they’re a transfer payment.
  2. There’s a difference between tariffs on consumer products and tariffs on capital goods.
  3. Tariffs can bring economies into or out of equilibrium.
  4. Tariffs can be a tax on domestic production.
  5. Tariffs help some domestic producers but often hurt others.
  6. Tariffs invite easy retribution.
  7. Tariffs applied to many nations fail to deal with the most serious issues and challenges in the global trading system, which are “behind-the-border” challenges from a select number of nations.
  8. Tariffs broadly applied to many nations hurt our ability to form alliances against China.
  9. At best, tariffs are a tactic to create leverage.
  10. Employed unilaterally, tariffs undermine the integrity of the global trading system.

“The administration’s trade policy is at its best when it is focused on righting the wrongs of our global trading system, but there is a wide array of tools beyond tariffs that can effectively address trade distortions,” said ITIF Vice President Stephen Ezell, co-author of the report. “America must be the leader of a liberal, international economic order in which fewer nations embrace mercantilist practices—an approach which has produced tremendous wealth for the United States and its allied trading partners.”

Read the report.