Trump vows 35 percent tariff on companies that move jobs overseas

Should the United States impose a 35-percent tax on products sold by businesses that fired American workers to send jobs overseas? Trump says yes, but economists aren't sold on the idea.

First Look

After wielding tax breaks as positive reinforcement in a one-time jobs-saving deal announced last week at Carrier Corp. in Indianapolis, US President-elect Donald Trump renewed his call Sunday morning for steep tax penalties as a form of negative reinforcement to keep other manufacturing companies from shipping American jobs overseas.

In a series of six tweets, Mr. Trump vowed to impose a 35-percent tax on products sold inside the United States by any business that fired American workers and built a new factory or plant in another country. The proposed tariff resembles one he described last year upon launching his bid for the Republican presidential nomination, when he promised to punish Ford Motor Co. for its plan to build a $2.5 billion manufacturing plant in Mexico – a move that will proceed as planned, the company said Friday.

Despite acknowledging that globalization has, in some ways, hurt working-class Americans, economists are not sold on Trump's idea.

"Imposing tariffs or putting up trade barriers may sound good, but it will hurt our economy and credibility," Wendy Cutler, former acting deputy US Trade Representative who helped negotiate the Trans-Pacific Partnership last year, told Reuters in March.

Tara Sinclair, a George Washington University economist, said history has shown that using tariffs to protect jobs simply doesn't work. Even the protected jobs eventually disappear, and they are replaced by new and different jobs that have "made our economic pie much bigger, with the potential for everyone to have a bigger slice," she told Politifact.

"Resistance to changes in the jobs mix is futile," Dr. Sinclair said. "But more than that, it’s counterproductive."

The idea is to put American interests first by making it less attractive for US-based companies to offshore jobs internationally in search of cheap labor, as Trump explained in his tweets Sunday.

"The U.S. is going to substantialy [sic] reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. ...... without retribution or consequence, is WRONG!" he wrote. "There will be a tax on our soon to be strong border of 35% for these companies ...... wanting to sell their product, cars, A.C. units etc., back across the border.

"This tax will make leaving financially difficult, but..... these companies are able to move between all 50 states, with no tax or tariff being charged. Please be forewarned prior to making a very ... expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS."

Trump also deleted one tweet in the series that had apparently been sent prematurely, as The Boston Globe reported. It said, "but these companies are able to move between all 50 states and negotiate a tax free deal! Our country cannot keep losing these jobs, & won’t."

Writing for Bloomberg on Friday, Ronald J. Daniels and Michael Trebilcock said Trump has been consistent in his opposition to international free trade. (He has proposed a 45-percent tariff on Chinese-made goods, as The Guardian reported.) Although globalization has had an indisputably positive impact on the whole, its impact has been acutely felt among certain segments of the US workforce.

"Turning things around calls not for higher tariffs and tightened borders, but a set of policies that take seriously the concentrated impact that economic change has on displaced workers and their communities," they wrote.

In the long run, America needs to invest in its education and worker-training infrastructure, while acknowledging in the short run that free trade and technological innovation are not trends that should be stemmed, they added:

"The best way forward is harnessing globalization's benefits while also addressing the legitimate needs of those who have paid the biggest price."

Material from The Associated Press was included in this report.