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The U.S. president may be hard pressed to usher in a new American ‘Golden Age’ – at least using tariffs – says an Algoma University economics professor.
After making the pledge on the campaign trail, President Donald Trump’s first months in office have been marked by steep tariffs – and tariff threats – against Canada, Mexico, and countries around the world, sparking widespread concern about rampant price hikes and a broader economic downturn.
In an interview with SooToday, professor Nusrate Aziz said tariffs are traditionally used to protect budding industries from international competition, by making foreign industries less competitive against their domestic counterparts.
But, he said, that is not what Trump is doing.
“Rising industry protection – that is not the case when Donald Trump imposed that tariff, or planned to impose the tariff,” Aziz said, pointing to Trump’s stated goals of raising government revenue through tariffs, or using tariffs as a “political tool” to stymie the flow of fentanyl.
Nor will tariffs work – directly, at least – with Trump’s hope to encourage businesses to set up shop on American soil.
“Another issue is when Donald Trump says, 'I will bring foreign jobs to the US – that's the reason I protect my industry,'” Aziz said. “That’s a matter of discussion, actually. It does not directly bring jobs.”
While tariffs can raise money, and make foreign industries less competitive, they are unable to train workers, Aziz said.
“Tariffs can bring some capital there in America, but then, how about the labour? There is a restriction on immigration policy, so America cannot bring . . . a lot of labourers with the capital,” he said.
Widespread tariffs might also cause workers in the export industry to shift to the import industry, which may give “them a better salary” with tariffs in place – all of which could “create crisis, actually, in the labour market in the short run” as tariffs cause widespread market shifts.
“Only capital cannot produce the goods. You need labour, you need land.”
In the short term, Aziz said widespread tariffs will lead to supply chain disruptions – such as in the auto industry, which relies on “intermediate goods from Canada and Mexico” – as opposed to bolstering the U.S. economy.
In the long term, the rising cost of imported goods could translate to higher costs for final products which, Aziz said, will not likely lead to job creation.
Some industries rely on cheaper manufacturing in other countries – such as iPhones in Asia – which will “not be competitive at all” if manufactured in the U.S. market.
“If you bring them back, these will not be competitive at all. If your products are not competitive, you cannot export to the global market,” Aziz said.
Should the U.S. continue down this path, Aziz said economic growth could be slowed worldwide, given the size of its economy.
“America can affect the world. I see in the future, the world production will be down, so growth will be adversely affected, and then, of course, trade will be less, and political issues will rise.”