No one can say we weren’t warned. During his debate with then Vice President Kamala Harris, President Donald Trump clearly stated, “Other countries are going to finally, after 75 years, pay us back for all that we’ve done for the world, and the tariff will be substantial…” Promises made, promises kept. Unfortunately.
I don’t think, however, that anyone could have imagined that “substantial” tariffs would include a baseline 10% tariff on all imported goods and higher, individualized reciprocal tariffs on countries identified as having the largest trade deficits with the United States. Beyond these broad measures, specific sectors are also targeted, including a 25% tariff on all imported automobiles and auto parts. The tariffs also eliminate previous exemptions to the existing 25% tariffs on steel and aluminum imports, which have been in place for some time.
The scale of these tariffs is actually beyond “substantial,” reaching levels not observed since World War II. The magnitude of the Trump Tariffs is the equivalent of bringing a bazooka to a pillow fight.
President Trump’s flag-adorned Rose Garden ceremony included a “reciprocal tariff” chart that gave the false impression that tariffs were far higher than they actually are, that the United States is on the losing end of most existing tariffs, and that the new “reciprocal tariffs” would only be half of what our trading partners are charging us.
But, the tariff column on the President’s chart was completely disconnected from any actual tariff. It was really a number derived by taking the difference between imports and exports with each country, divided by that country’s exports to the US, andthen attributing that deficit entirely to tariffs and other protectionism. That ratio was then divided in half to produce what the administration calls a “discounted reciprocal tariff.” In other words, any country with whom we have a trade deficit is assumed to have used higher tariffs to gain that advantage and would be punished with a “reciprocal tariff” equal to a rate of half of their trade deficit — an amount that is multiple times higher than their tariffs on our goods.
The truth is, however, most deficits are caused by a country having a comparative advantage (and in some cases an absolute advantage) in producing a specific product that makes it more efficient to import than to produce, while freeing up labor and capital in our market to make other goods and services that we can either consume or export. This is the “economics 101” of all voluntary trade, which applies equally to trade between nations.
According to the Heritage Foundation’s own Trade Freedom Index, there are actually 68 countries that have lower tariffs and fewer barriers to trade than the United States. This includes many countries targeted by President Trump. One wonders if the Heritage Foundation will continue to publish this telling report.
Former Heritage economist Dan Mitchell correctly points out that most of our major trading partners actually charge relatively low tariffs — with many having lower weighted average tariffs over all products than the United States charges on imports.
Readers may be surprised to learn that even Canada has lower weighted average tariffs than the US, and Mexico’s weighted average tariff is practically the same as ours (a sign of the free trade agreement President Reagan originally negotiated that President Trump renegotiated four years ago, is still working).
In fact, the weighted average tariff rate on all US products globally is only 2.3 percent. This is far lower than the cherry-picked tariffs on relatively minor products being used to push these new reciprocal tariffs by the White House and their supporters. It is also substantially lower than the misleading rates that appear on the President’s chart.
Mr. Mitchell’s comparison includes an estimated tariff for the United States based on the new Trump “reciprocal tariff” regime. As you can see, this new tariff rate is 8 times the global average and is indefensible on any scale of reasonableness. This tariff (the bazooka in the pillow fight), if allowed to remain for any prolonged amount of time, will blow a large hole in both the U.S. and the global economy.
If President Trump were really trying to establish a “reciprocal trade” regime, he would have to actually lower the U.S. tariffs to the 68 countries listed by the Heritage Foundation — many of whom are our largest trading partners, as seen in the chart above. This, of course, would undermine President Trump’s rhetoric that the United States has been taken advantage of for 75 years, and it wouldn’t allow him to claim that these tariffs will fill the U.S. treasury with trillions of “free” money paid for by foreign companies.
These tariffs could not come at a worse time for the Commonwealth of Virginia. With Virginia’s unemployment rate already ticking up from the much-needed cuts in the federal workforce, the impact of these significant “reciprocal tariffs” will further depress Virginia’s economy. While the federal labor force reductions will hit many upper and middle-class Virginians, tariffs will burden Virginia’s poorest residents the most.
As the Thomas Jefferson Institute has written before, international trade plays a vital role in Virginia’s economy, driving growth, supporting jobs, and enhancing competitiveness. According to the U.S. Global Leadership Coalition, in 2023, Virginia exported $22.4 billion worth of goods, with key markets including Canada, China, and India. The agricultural sector alone contributed $1.5 billion in exports, underscoring its importance to the state. Additionally, over 7,000 Virginia-based companies are engaged in exporting, 85% of which are small- and medium-sized enterprises. A trade war puts these jobs and these businesses at significant risk.
Trade supports over 1.1 million jobs in Virginia, accounting for roughly one in five jobs in the state. These jobs span various industries, from manufacturing and agriculture to defense and technology. Improvements at The Port of Virginia, now one of the most advanced on the East Coast, have tripled its economic impact over the last two decades, reaching $92 billion in annual output. This has reinforced Virginia’s role as a critical hub for international trade. Virginia simply cannot afford a protracted trade war, especially as we struggle to delink our economy from the federal government.
Of course, trade isn’t just about expanding the international economic pie but is also an important part of promoting peace and individual liberty across the globe. It is not too late for President Trump to claim victory and remove the new tariffs before they do too much economic damage, especially here in Virginia. The damage to our relationships with our closest allies, however, will take far longer to heal.
Derrick Max is the President and CEO of the Thomas Jefferson Institute for Public Policy. He can be reached at [email protected]