Photographer: Luke Sharrett/Bloomberg
One of Donald Trump’s myriad controversial policies relates to free trade. Specifically, he’s against it and wants to slap a 45% tariff on Chinese imports. Mexican goods will also face a 35% tax if he enters the White House.
The idea is to reduce the trade gap between the USA and its partners as well as stimulating local production. But in the globalized world, we cannot bisect American industry from the global supply chain. Harming one will invariably impact the other.
The move has been popular among voters in the primaries, rewarding the businessman with big wins across the South and Midwest. However, the policy has been widely panned by economists and experts.
Richard Katz, editor of the Oriental Economist Report, argues that there would be a profound impact upon the American economy should Trump implement his proposals:

Mr. Trump’s tariffs would amount to a tax on American companies and households equal to 1.5% of GDP—1.2 points from his 45% tariff on Chinese products and another 0.3 points from a 35% tariff on goods made in Mexico by American firms.”
The presidential candidate has subsequently backpedalled from this commitment, but the New York Times NYT -0.55% published the following excerpt from an interview transcript:
I would tax China coming in—products coming in. I would do a tariff. And they do it to us. We have to be smart. I’m a free trader. I’m a free trader. And some of the people would say, ‘Oh, it’s terrible.’ I’m a free trader. I love free trade. But it’s got to be reasonably fair. I would do a tax, and the tax—let me tell you what the tax should be. The tax should be 45 percent.”
Trump, a herald of his own business success, seemed to later sense the damage the proposals might cause other companies. But the above statement looks declarative.
The statement has not been received well by business. For instance, Ford has expressed unease at the Republican lead’s comments. CEO Mark Fields stated that “free and fair trade is really important. We have always supported every free-trade agreement since we’ve been in existence.” Ford’s business model is premised upon open borders, with many manufacturing plants based in Mexico to bring the benefits of low-cost of production to American consumers.
Added to which, its suppliers are sprinkled throughout the world and across many borders.
This is not unusual. Even looking at the supply chain for a simple product, such as pencil, will reveal a complex web of international producers: the wood may come from Brazil, the graphite from India and the paint from China. In between, there may be value-adding nodes spread out throughout the world that convert raw materials into refined goods.