Topic: Tariffs
“Ideally, repeal the ARC and PLC programs. Farmers eligible to participate in ARC or PLC are generally already able to purchase federal crop insurance, policies that protect against shortfalls in expected revenue whether caused by lower prices or smaller harvests. The ARC program is especially egregious because farmers are being protected from shallow losses, which is another way of saying minor dips in expected revenue. This is hardly consistent with the concept of providing a safety net to help farmers when they fall on hard times. The Congressional Budget Office (CBO), in one of its options to reduce the federal deficit, has once again identified repealing all Title I farm programs, including ARC, PLC, and the federal sugar program.”
Repealing these key safety nets, which are designed to help manage revenue and price risks for commodity crops like corn, soybeans, wheat, and rice, would have significant consequences for farmers (which in turn affects rural economies.) Let’s break that down a little:
The ARC and PLC programs provide financial assistance to farmers when crop prices or revenues fall below certain thresholds. If repealed, farmers would be more exposed to price fluctuations and yield variability, which could be particularly destabilizing in years of low prices or poor harvests. In the absence of these safety nets, periods of low prices could drive some farmers out of business, particularly smaller or more marginal producers. At the very least, it reduces income stability for farmers, which would lead to increased farm bankruptcies and financial stress in rural communities.
Bakst is correct that crop insurance is already a key tool for farmers, but ARC and PLC provide additional layers of protection. Without them, farmers might need to rely more heavily on crop insurance. While this could work for some, insurance generally doesn’t cover price drops as well as ARC and PLC, so farmers would still face greater exposure to price-related risks. Result: Farmers may have to buy more comprehensive and expensive crop insurance, increasing their operational costs without fully replacing the benefits of ARC and PLC.
More potential outcomes of this in the full contextual analysis of Section 3.1: Department of Agriculture here.
“Lassman does not think that an aggressive U.S. trade policy would lead to more manufacturing jobs. Rather, he writes, “Federal Reserve research shows” that the Trump Administration’s steel tariffs, and the retaliatory tariffs levied by other nations in response, “have cost about 75,000 manufacturing jobs while creating only about 1,000 jobs in the steel industry.” Furthermore, he writes that “protectionism and similar progressive policies tend to weaken American security.” Lassman maintains that “trade creates peace,” and if China weren’t so reliant upon trade with the U.S., it would be “much more unstable and dangerous.””
Project 2025 is a bit all over the place with regard to who supports tariffs and who does not. Lassman didn’t serve in the Trump administration, so perhaps he has a clearer picture of what a bad idea tariffs generally are. Lassman is correct in his assertion, but off on his numbers. Trump’s tariffs on China alone cost the United States 245,000 jobs, according to a Janurary 21 study, in addition to $51 billion in increased consumer prices and a net loss of $7.2 billion to the economy. More about that here.
For context, Lassman shares Section 4.6: Trade with Peter Navarro, who disagrees with him almost across the board. Peter Navarro DID serve in the Trump administration, and spent four months in prison in 2024 for contempt of Congress. Navarro is a proponent of “decoupling” from China.
Full contextual analysis of Section 4: The Economy here.
“The first challenge is rooted in MFN: the “most favored nation” rule of the World Trade Organization (WTO). According to the MFN rule, WTO members must apply the lowest tariffs that they apply to the products of any one country to the products of every other country. However, WTO members can charge higher tariffs if they apply these nonreciprocal tariffs to all countries.”
This is partially inaccurate, and entirely needing clarification. The statement is correct that under the MFN rule, WTO members are generally required to apply the same tariffs (and other trade rules) to the products of all WTO members. This means that if a country grants a favorable tariff rate (the “lowest tariffs”) to one member, it must extend the same rate to all other WTO members. This principle is aimed at preventing discrimination between trading partners.
The MFN rule does allow for certain exceptions, including entering into FTAs (Free Trade Agreements) or “customs unions”, where they apply lower tariffs to members of these agreements without extending the same treatment to all other WTO members.
There are also special preferences regarding developing countries, which allows developed countries to apply lower tariffs on goods from developing countries without violating the MFN rule.
The claim that “WTO members can charge higher tariffs if they apply these nonreciprocal tariffs to all countries” is incorrect. The MFN rule does not permit charging higher tariffs across the board simply as long as they are applied to all countries. In fact, the WTO agreements limit tariff rates (known as “bound tariffs”) that countries can impose. Members can raise tariffs only if the tariffs remain within these negotiated bound rates or if they have a legitimate reason, such as invoking safeguard measures (to protect a domestic industry) or through an authorized dispute settlement process.
Full contextual analysis of Section 4.6: Trade here.
“The practical result has been the systematic exploitation of American farmers, ranchers, manufacturers, and workers through higher tariffs institutionalized by MFN. In turn, this unfair and nonreciprocal trade has resulted in chronic U.S. trade deficits with much of the rest of the world. This systemic trade imbalance serves as a brake and bridle on both GDP growth and real wages in the American economy while encumbering the U.S. with significant foreign debt.”
Ah, yes. More classic “not understanding what trade deficits are.”1 The claim that U.S. trade deficits are a direct result of “unfair and nonreciprocal” trade practices under MFN is a misrepresentation of the causes of trade deficits.
What really happened, is that Trump introduced punishing tariffs that were in violation of WTO rules, which resulted in harm to farmers, ranchers, manufacturers, and workers. Navarro is working really hard to shift the blame, and not very convincingly. This is explained in the analysis below.
Full contextual analysis of Section 4.6: Trade here.
“In Scenario One, if all 132 countries were to lower their higher nonreciprocal tariffs to U.S. levels, the overall U.S. trade deficit in goods would be reduced by $58.3 billion, or about 9.4% of that deficit. In contrast, in Scenario Two, if these countries were to refuse to reciprocate and the U.S. were to raise its tariffs to mirror those countries’ levels, the reduction in the U.S. trade deficit would be slightly larger: an estimate $63.6 billion, or 10.2% of the deficit. This suggests that implementing the USRTA would help to create between 350,000 and 380,000 jobs.”
This statement is based on highly questionable/variable assumptions. This is explained in the analysis below.
Full contextual analysis of Section 4.6: Trade here.
“Strategically expand tariffs to all Chinese products and increase tariff rates to levels that will block out “Made in China” products, and execute this strategy in a manner and at a pace that will not expose the U.S. to lack of access to essential products like key pharmaceuticals.”
I would love to see the logistics on that one. One possible way is graduated tariff increases on different categories of Chinese products over time. Another way is targeted exemptions for “essential” products. If they wanted to cut off China across the board (as Navarro seems to be arguing for), you’d have to first diversify your supply chains for essentials into (for example), Mexico, India, Vietnam. Navarro doesn’t detail the plan for this.
Full contextual analysis of Section 4.6: Trade here.
“Stop Communist China’s abuse of the so-called de minimis exemption, which allows it to evade the tariffs for products valued at less than $800.”
The de minimis exemption is a U.S. customs rule that allows goods valued at less than $800 to enter the U.S. duty-free. It applies to all countries, not just China, and was raised to $800 by Congress in 2016 as part of the Trade Facilitation and Trade Enforcement Act. This rule is designed to reduce administrative burdens by simplifying customs processing for low-value goods, such as personal purchases made by U.S. consumers from foreign e-commerce platforms like Amazon, eBay, and Alibaba.
Chinese sellers on platforms like AliExpress and Wish take advantage of the de minimis threshold to sell low-cost goods directly to U.S. consumers without paying U.S. tariffs. This includes a wide variety of small electronics, apparel, accessories, and other consumer products. Chinese sellers benefit from this rule to ship low-value goods tariff-free. However, this practice is not unique to China, and addressing it requires careful consideration of potential unintended consequences, such as higher costs for U.S. consumers and complications with international trade rules.
Full contextual analysis of Section 4.6: Trade here.
“When President Trump wanted to implement steel and aluminum tariffs, he had a willing servant in Secretary of Commerce Wilbur Ross. However, Secretary of Defense James Mattis resisted. Mattis simply did not understand a key tenet of the Trump Administration: Economic security is also national security. Without vibrant steel and aluminum industries, it will be difficult for America to provide the Pentagon with the kind of weapons it needs to defend the homeland.”
Since the effects of Trump’s steel tariffs were provably detrimental, it would seem General Mattis understood things just fine.
Full contextual analysis of Section 4.6: Trade here.
“Implement tariff relief to help counteract inflation by reducing prices for affected goods as well as to strengthen supply chains and boost manufacturing. End Section 232, 201, and 301 tariffs. Work with Congress to pass legislation repealing those provisions so future Presidents cannot abuse them.”
Lassman is arguing for ending certain tariffs to combat inflation.
The pros of this would be lower consumer prices, supply chain improvement, and increased manufacturing output.
The cons include potential job losses or factory closures in sectors that are protected by these tariffs (assuming they would struggle to compete with cheaper imports.) This includes steel, solar, et al. Increasing imports also widens the trade deficit, assuming one is concerned about that. More details in the analysis below.
Full contextual analysis of Section 4.6: Trade here.
“When people try something repeatedly and it still doesn’t work, they should stop doing it – especially when the consequences turn out to be just what conservative economists have long predicted they would be. With tariffs, the proper reform is not only to get rid of the individual tariffs that have backfired, but also to build institutional safeguards against future abuse.”
A quote often misattributed to Einstein (but was actually Rita Mae Brown) goes, “The definition of insanity is doing the same thing over and over again and expecting different results.” Lassman continues:
“We are five years into the biggest experiment with tariffs since the Great Depression, and the results are in: The new tariffs raise consumer prices for ordinary Americans by about $1,200 per household every year and benefit only a small number of special interests. Steel and aluminum tariffs, enacted on national security grounds, angered allies. Beijing made not a single substantive reform in response to four rounds of tariffs plus an attempted Phase One agreement.” (Project 2025, Section 4.6: Trade, Kent Lassman, pages 833 and 834.)
It kind of says it all that someone from Project 2025 would admit that Trump’s tariffs were an abject failure.
Full contextual analysis of Section 4.6: Trade here.