When economists bash Donald Trump’s aggressive trade stance against China and Mexico, Trump says similar tactics worked for Ronald Reagan.
Trump has threatened to impose a 35% tariff on goods imported from Mexico, and a 45% tax on goods from China.
Here’s how Trump defended the idea in June: “President Reagan deployed similar trade measures when motorcycle and semiconductor imports [from Japan] threatened U.S. industry. I remember…that had a big impact folks.”
But that’s not how Trump saw it in 1989.
Japan has “systematically sucked the blood out of America — sucked the blood out!” Donald Trump said in a 1989 interview on the Morton Downey Jr. show, dug up Tuesday by CNN’s KFile team. “They have gotten away with murder. They have ended up winning the war.”
Trump’s strategy to whip Japan in shape in 1989: a 20% tax on all goods.
“You tax the hell out of all of them — 20% on oil, 20% on the cars, 20% on the VCRs,” he said on the show.
Trump didn’t mention Reagan during the episode — but the president had already gone after Japan.
In 1981, Reagan limited the number of cars Japan could import into the United States to protect U.S. automakers amid a sluggish economy. That was effectively viewed as a tariff via trade restriction.
In 1983, Reagan put a 45% tariff on Japanese motorcycles to protect Harley-Davidson.
And in 1987, two years before Trump’s blood-sucking comment, Reagan put a 100% tariff on Japanese electronics, like TVs, computers and power tools, though not specifically VCRs.
Japan had been accused to “dumping” its semiconductors in the U.S., selling them at such low prices that U.S. companies couldn’t compete. The U.S. Commerce Department said in 1987 that Japan had stopped the practice months after Reagan’s tariff was imposed.
Reagan’s strategy succeeded in curbing Japan’s tactics. But American consumers had to pay higher prices and it led to job losses. Also while some of Reagan’s tariffs were effective, other past tariffs, such as in the 1930s, were disastrous for global trade and the U.S. economy.
Several trade experts warn that high tariffs against Mexico and China would cost America jobs and hurt the economy.
Another key detail is that Reagan’s tariffs were targeted at very specific items from Japan. Trump indicated during the first debate he would impose tariffs on all goods coming from Mexico, if not China too.
“If you think you’re going to make your air conditioners or your cars or your cookies or whatever you make and bring them into our country without a tax, you’re wrong,” Trump said during the first debate.
While Trump only referenced U.S. companies, trade experts caution that if Trump taxes companies like Ford, he would have to tax all companies or risk having American firms lose sales in the United States to foreign brands.
Navarro, the adviser, says Trump would only use the threat of tariffs to get better trade deals.
The difference between widespread and targeted tariffs, experts say, is the gap between effective trade policy and a potential trade war — where other nations tax American goods in retaliation, sending prices of many things skyrocketing in the United States.