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President Donald Trump may have delayed the implementation of tariffs on Mexico, but the risk of trade protectionism is still present.
- Lawmakers, economists, and experts of all political leanings have been decrying President's Donald Trump's decision to impose tariffs on all good coming from Mexico.
- But while the Mexico tariffs are unpopular, there's a good chance that similar trade protectionism isn't going anyway.
- Political motivations will make trade protections and tariffs a big topic of the 2020 election.
- Visit Business Insider's homepage for more stories.
President Donald Trump averted stating a new front in the trade war on Friday by calling off his proposed import tariffs on Mexican goods.
The specter of tariffs on one of America's leading trading partners created jitters on Wall Street and drew a strong rebuke from economists, business leaders, and a bipartisan group of members of Congress.
In today's polarized America, few political issues can gather any semblance of bipartisan support. Republicans and Democrats on Capitol Hill are hardwired to disagree, but there is one issue that seems to have achieved near-universal agreement among experts across the political spectrum: Tariffs are bad for the US economy.
Nevertheless, despite bipartisan skepticism, there is good reason to expect that trade protectionism will continue to be a key campaign issue leading up to the 2020 election.
As Trump threatens yet another round of tariffs on Chinese goods, Mexican and American leaders had to work overtime in a flurry of last-minute negotiations to prevent the president's proposed tariffs on Mexico from being implemented on June 10.
The import duties would have initially been set at 5%, but were scheduled to quickly ratchet up to 25% by early fall.
As the deadline approached, groups who rarely see eye-to-eye on anything sounded the alarm on tariffs and the inevitable trade war to follow. Newspapers whose editorial boards range across the political spectrum, lawmakers from both sides of the aisle, and a slew of ideologically diverse think tanks all denounced Trump's proposals.
Increasing tariffs on Chinese goods to 25% is too much for American importers to absorb. Adding a 5% to 25% tariff on Mexican goods would have only compounded the problem. The total cost to American businesses and consumers if the tariffs on Mexico hit 25% would top $86 billion, according to estimates from the US Chamber of Commerce.
Tariffs on imports are paid by American companies and their consumers - not the exporting country upon which the tariffs are imposed. On top of that, the affected trading partner is almost certain to impose retaliatory tariffs of their own, further damaging US business. Consumers are hurt by the import tariff, and American workers are hurt by the retaliatory export tariffs. It's a clear lose-lose situation the US.
So why does Trump's isolationist trade policy remain relatively popular among his base, many of whom reside in states that would likely be among the hardest hit by the proposed tariffs?
The answer lies in the bipartisan appeal of populist messaging and the desire of political candidates to appeal to the voters most likely to show up in the primary elections that largely determine their fate.
While polls have consistently shown substantially more Americans oppose tariffs, those who do support more protectionist policies generally represent a combination of Trump's strongest supporters and liberal populists. So it should be no surprise that hawkish rhetoric on trade is also a staple of the campaign speeches of more liberal Democratic candidates like Sens. Elizabeth Warren and Bernie Sanders.
The high profile of Trump's tariff threats, combined with the protectionist talk of his Democratic rivals, has made trade protectionism a potential political winner among parts of the base of both parties. This despite the ominous warnings of dire consequences by a consensus group of bipartisan policy experts.
Social psychology can help also explain the paradox. In a study published in April, two social scientists examined the similarities of extreme partisans in contrast to more centrist-leaning moderates.
The authors found that conservative and liberal ideologues were strikingly similar to each other in several psychological characteristics, such as being willing to disregard policy nuance in favor of a more "simplistic, black-and-white perception of the social world" and a disproportionate belief that their point of view is correct, even when there is substantial evidence to the contrary.
Those looking for easy answers and simple solutions have found the perfect issue in trade protectionism. Populist "America first" rhetoric plays well to those who don't want to consider the details of employment effects, cost shifts, inflation, market reaction, and retaliatory tariffs.
And because politically-active primary voters tend to be more extreme in their partisan views, expect more tough talk about trade and tariffs from candidates in the 18 months leading up to the contentious 2020 election.