It appears that President Trump might not require Congress's approval to implement his most contentious trade policy.
Presidents possess extensive authority to impose tariffs on both allies and adversaries, as demonstrated by former President Donald Trump during his 2018 trade war initiation. Recent concerns are emerging due to Trump's latest pledge to employ his favorite economic weapon secretly on nations that distance themselves from the US dollar.
At a Wisconsin rally in a contested battleground last week, Trump asserted that he would impose substantial tariffs on foreign countries who abandon the US dollar.
"Many nations are abandoning the dollar. They won't desert the dollar with me," Trump declared. "I'll state, 'You abandon the dollar, you won't be transacting business with the United States as we'll levy a 100% tariff on your merchandise.'"
The US dollar is currently the worldwide reserve currency, subsequently serving as a potent instrument for global trade and functional global economy. However, Trump's statement appears to be a reaction to China, Russia, and other nations that have openly discussed seeking an alternative to the greenback.
Taking a firm stance in safeguarding the all-powerful dollar might sound appealing during election campaigns, but analysts warn that imposing such heavy tariffs could backfire on American citizens.
"I'd describe this as inconsistent, tough-guy grandstanding," Maury Obstfeld, a senior fellow at the Peterson Institute for International Economics, told CNN in a telephone conversation.
Obstfeld, a former chief economist at the International Monetary Fund (IMF), mentioned that even though some nations have transitioned away from the US dollar, the "greenback remains the world's premier currency."
‘Absurd’ tariff proclamations
Although it is unclear under what circumstances Trump would impose 100% tariffs, Obstfeld underlined that such high tariffs would ultimately squeeze prices on consumers—especially if implemented widely.
"100% tariffs would generate a significant impact on the price of goods we import from those countries and subsequently increase inflation," Obstfeld said.
Christine McDaniel, a former senior trade official in the George W. Bush administration, described Trump's 100% tariff proposal as "absurd" and "ridiculous campaign propaganda."
"Trump's solution to almost everything is tariffs," said McDaniel, now a senior research fellow at George Mason University's Mercatus Center.
McDaniel informed CNN that Trump can unilaterally implement the tariffs he's suggesting without Congress' approval following a report from the United States Trade Representative (USTR) under Section 301 or a report from the Commerce Department under Section 232. She cautioned that it's feasible for Congress to amend the current law to withdraw that trade power.
Alex Durante, an economist at the Tax Foundation, a right-leaning think tank, told CNN that 100% tariffs would pose a danger to the economy.
"When talking about tariffs to such an extent, that will undeniably heighten the risk of a recession. Consumers possess limited funds to spend," Durante said.
Obviously, it is unclear how sincere Trump is regarding this proposal. It's plausible that he is merely presenting 100% tariffs as a threat to alter the behavior of other countries.
Brian Hughes, a senior advisor to the Trump campaign, informed CNN in a statement that Trump's trade policies will "stimulate growth, decelerate inflation, inspire American manufacturing," and safeguard workers from "lopsided policies curated in favor of other countries."
"Time warp announcement! Just like in 2016, Wall Street projections suggested that Trump policies would result in reduced growth and higher inflation, the media unquestioningly adopted these forecasts, and the record was never amended when actual growth and job gains notably surpassed these predictions," Hughes said.
‘Definitely inflationary’
The Trump campaign failed to enlighten CNN about Trump's strategy to implement 100% tariffs or triggers.
Trump has repeatedly insisted that his trade agenda would invite no inflation—even though research has consistently found that American consumers and industries absorb nearly the entire expense of US tariffs, including those imposed by Trump.
Although economists may dispute the extent of his proposed tariffs' impact on prices, many concur they would boost inflation.
Even some scholars at the University of Pennsylvania's Wharton School, the elite business school Trump finished his undergraduate studies at, acknowledge this reality.
"If we indeed implemented these tariffs, there's no question prices would rise. The larger question is how significant other countries would react with their own tariffs," Kent Smetters, the director of the nonpartisan Penn Wharton Budget Model, told CNN in a phone conversation on Wednesday.
"There's no question it's inflationary," said Smetters, who is a business economics and public policy professor at Wharton. He asserted that some estimates might overestimate the impact of tariffs since tariffed goods can sometimes be replaced with domestic goods.
During Tuesday night's ABC debate, Trump asserted that various "top professors" at Wharton support his plan.
Wharton did not respond to CNN requests about faculty members who endorse Trump's plan.
Brusuelas warned that while a president can get away with making extreme promises, managing global financial markets requires a different approach. He mentioned that if Trump's tariff plan were implemented, it could potentially trigger a market panic similar to what Truss faced in 2022. Her misunderstood tax plans led to widespread disapproval, and she stepped down, becoming the shortest-serving prime minister in British history.
Brusuelas stated, "If they attempted something like this, they'd face a swift and severe response from the American bond market. It would result in a scenario akin to a Truss incident, where worldwide investors show a lack of confidence."
Despite this, some business associations are preparing for the potential return of "Tariff Man," a nickname Trump gave himself.
Matt Priest, the president and CEO of the Footwear Distributors & Retailers of America, spoke about taking the former president seriously due to his past record. "We're dedicating a lot of time to instructing our members on how to cope with the repercussions of these proposals," said Priest.
The interesting aspect about Trump's 100% tariff proposition is that certain experts are concerned such threats could prompt nations to seek alternatives to the dollar – the direct opposite of Trump's stated objective.
Obstfeld, the former IMF economist, said, "The type of verbal attacks Trump is employing is the most expedient method to persuade countries to abandon using the dollar."
"This proposal to impose 100% tariffs on nations that distance themselves from the US dollar could potentially lead to significant price increases for consumers, as mentioned by Maury Obstfeld, a senior fellow at the Peterson Institute for International Economics."
"Furthermore, the consistent use of tariffs as a solution by President Trump, as pointed out by Christine McDaniel, a former senior trade official, could potentially harm the economy and even lead to a recession, according to Alex Durante, an economist at the Tax Foundation."
