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Economy USA World

Biden’s Trade Chief Warns Trump’s Tariff Plan to Be “Very Dangerous” for Workers

Biden’s Trade Chief Warns Trump’s Tariff Plan to Be “Very Dangerous” for Workers
Source: Bloomberg
  • PublishedJanuary 17, 2025

Outgoing US Trade Representative Katherine Tai has strongly criticized President-elect Donald Trump’s proposal to use tariff revenue to replace income taxes, calling it “very, very dangerous” and arguing it would disproportionately harm lower-earning workers, Bloomberg reports.

In an interview, Tai expressed concerns that this approach would shift the tax burden onto those least able to bear it.

While Tai acknowledged that tariffs could be effective tools for persuading companies to bring critical supply chain manufacturing back to the US, she drew a clear distinction between using them for industrial policy and using them for budgetary purposes. Referencing the Gilded Age of the late 19th century, when the US relied heavily on tariffs for government revenue, she cautioned against repeating that model, which she said resulted in a system where “people with less income are bearing a much larger burden of funding the government.”

Trump has repeatedly said that sweeping tariffs are a way to both encourage domestic production and generate revenue, proposing the creation of an “External Revenue Service” to collect these funds. Historically, tariffs were the primary source of US federal revenue until the implementation of the income tax in 1913. Currently, tariffs account for less than 2% of federal revenue.

Tai defended the use of tariffs for industrial policy, pushing back against the argument that they inevitably lead to inflation. She argued that recent consumer price increases were primarily driven by supply chain disruptions, such as those experienced in 2022, rather than import taxes. This stance aligns with her approach during the Biden administration, which largely maintained tariffs imposed by Trump and even increased duties on certain goods like electric vehicles and semiconductors.

Reflecting on her four-year tenure, Tai, the daughter of Taiwanese immigrants, expressed pride in her office’s contribution to “the project of re-imagining globalization.” She highlighted a shared vision with both her Republican predecessor, Robert Lighthizer, and her likely successor, Jamieson Greer, in recognizing the need to address distortions in global trade. She hopes the Trump administration will cooperate with allies to tackle these issues.

Tai emphasized that US trade policy needs to evolve to be more responsive to the US economy and support workers and manufacturers. She voiced satisfaction with the efforts to strengthen ties with the European Union but admitted disappointment at the lack of permanent resolution on trade disputes involving aircraft, steel, and aluminum. She noted the EU’s failure to grasp the necessity for “visionary transatlantic leadership.”

One key item on her successor’s agenda is the review of the US-Mexico-Canada Agreement, which Tai said offers a chance to update the agreement in light of recent events such as the pandemic and the need for supply chain resilience.

Written By
Michelle Larsen