Trump's Tariff Proposals

Investing.com — Republican presidential candidate Donald Trump's tariff proposals have the potential to be economically damaging unless offset by sufficiently large fiscal measures, according to analysts at BCA Research.

Trump has outlined plans to impose aggressive tariffs on the $3 trillion worth of imports coming into the US, including a 10% to 20% levy on all foreign goods and a 60% tax on items from China.

Speaking during a campaign event in September, Trump also threatened to impose 100% tariffs on every car coming into the US from Mexico, adding that he would reward US-based manufacturers with research and development tax credits. He claimed he would hit agricultural equipment maker John Deere (NYSE: DE) with a 200% levy on its imports into the US should the firm proceed with plans to shift production to Mexico.

The former president has said the tariffs are needed to protect working-class jobs and curb what he considers to be unfair practices by US trading partners, especially those with which Washington has a large bilateral trade deficit, such as China and the European Union.

During his first term, then-President Trump oversaw a period of high trade tensions with Beijing due to a raft of tariffs on Chinese goods.

However, tariffs still enjoy support across political parties, with both citing concerns that international trade barriers could lead to economic and social consequences. Current President Joe Biden’s administration – in which Democratic presidential hopeful Kamala Harris serves as Vice President – has maintained many Trump-era tariffs.

Funding raised by Trump's latest tariff plan, estimated in the trillions of dollars, could help offset sweeping corporate tax cuts he is also targeting, according to media reports.

Polls remain extremely tight ahead of the Nov. 5 election, with both Trump and Harris virtually tied in several key swing states that could heavily influence the vote's outcome.

If Trump wins, "the economic and financial market outlook will depend heavily on the sequencing of policies and the degree to which he pursues aggressive trade action," BCA Research analysts noted.

Many economists oppose the tariff plan, arguing it would likely lead to an increase in consumer prices. The BCA strategists predict tariffs will negatively affect both US and global growth unless accompanied by other fiscal support.

> BCA analysts noted: "The question is timing. If fiscal thrust is provided simultaneously with major tariffs, it’s possible that the net effect will be positive for growth."