A week after voters chastised Republicans for rising prices in the midterm elections, President Donald Trump’s White House signaled it would maintain tariff policy, even as Trump’s former top economic adviser warned Americans were paying the price.
Jim Goyer, Trump’s White House communications director, defended the tariffs as a tool to rebuild American manufacturing, secure supply chains and protect national security in a speech Tuesday at the B20 Summit, a gathering of global business leaders in Washington hosted by the U.S. Chamber of Commerce.
“And we’re just getting started,” Goyer said. “Our goal is to continue this pace for the remainder of the president’s term.”
But Gary Cohn, President Trump’s chief economic adviser in his first administration, offered a very different assessment in an on-stage interview late Tuesday.
“Tariffs are a sales tax on American consumers,” Cohn said, arguing that tariffs raise prices and force Americans to reconsider their purchases.
The rift exposed a growing dilemma for Trump. His trade agenda is to reshape global commerce and drive up costs for voters. Businesses are adapting to the disruption, but old trading systems are not returning.
“President Trump destroyed that system in a way that we don’t think we can go back from,” Kevin Brady, a former Republican lawmaker who helped lead the B20 summit, said in a conversation with Suzanne Clark, CEO of the U.S. Chamber of Commerce.
The political backlash was evident in the November 3 election. About two-thirds of voters say President Trump’s policies are contributing to inflation, according to a CNBC voter poll. Nearly nine out of 10 people said the cost of living was the main or deciding factor in their vote.
A separate Reuters/Ipsos poll released Tuesday found that while 62% of Americans support President Trump’s plan to eliminate tariffs, only 21% approve of his handling of the cost of living.
“Last week, American voters sent a clear message about the cost of living and economic security,” Clark said in his keynote address.
Pressure intensified on Tuesday when new government figures showed consumer prices rose 0.4% in October, faster than economists expected. Annual inflation hit 3.7% in September, the latest year-over-year figure available, and well above the Federal Reserve’s 2% target.
Tariffs are not the only factor causing price hikes. The war with Iran has caused energy costs to rise sharply, while housing, medical and other household costs continue to burden consumers.
But research shows that President Trump’s import tariffs are adding to these pressures. A study by the New York Fed estimates that about 26% of the tariff hike will be passed on to consumer prices, and that it will take nine to 12 months for some of the impact to trickle down to supply chains.
Mr. Cohn is currently Vice Chairman IBMargued that tariffs would generate revenue for the United States, but that the benefits would come at the expense of consumers.
“We’re looking at one side of the equation. We’re looking at the credit side of the balance sheet,” Cohn said, explaining how he would respond to President Trump’s defense of tariff revenue. “The debit side of the balance sheet is that all hardworking Americans paid the tariffs through the products they happened to buy.”
Still, Cohn thought there was room for a bipartisan trade deal. He suggested that President Trump and the next Democratic Congress could repeal tariffs on Canada while making protections against China and unfair trade practices permanent, making them less reversible for future presidents.
For businesses, that change has already begun. UPS CEO Carol Tomé said as global supply chains become more localized, customers are moving production and sourcing closer to home.
“Supply chains are becoming more diverse. Supply chains are becoming more regional,” Tomé said during a panel moderated by CNBC’s Morgan Brennan.
Separately, UPS will open a new $80 million-plus air hub in the Philippines in October to expand its network in Asia and improve connectivity across more than 1,100 global trade lanes.
Other executives, including Jim Fitterling, chairman of the chemical giant Dowdefended Trump’s tariffs despite their cost. Mr. Fitterling acknowledged that they could drive up prices, but argued that they are necessary to combat unfair competition and protect U.S. manufacturing.
Democrats plan to challenge Trump’s tariffs when they take control of Congress in January, but Trump’s veto and broad trade powers could make them difficult to overturn.
