Trump is reportedly considering a 5% tariff on all imports

Donald Trump rallyMark Wallheiser/Getty ImgesPresident-elect Donald Trump

The administration of Donald Trump may be getting ready to crack down on goods coming into the US.

According to a report by John King at CNN, the Trump transition team has been floating the idea of an executive order that would impose a 5% tariff on all imported goods soon after Trump takes office.

The report, citing multiple sources inside the transition, said that future Trump chief of staff Reince Priebus has talked about the 5% tariff with multiple business leaders and lawmakers and that Wilbur Ross, Trump’s commerce secretary pick, is getting ready to defend the move during confirmation hearings.

While the tariff is not a done deal, said CNN, it appears to at least be a serious consideration by the transition.

It was not clear whether this 5% tariff would be in addition to current taxes on imports, or replace the current levels. For instance, non-agricultural Chinese goods are already taxed at 2.5%, so it is unclear whether that would become 7.5% or 5%.

Ross and Trump’s pick for Treasury secretary Steven Mnuchin previously downplayed the idea of increased tariffs during an appearance with CNBC, saying the move would be a last resort.

On the other hand, Trump’s pick of Peter Navarro for national trade council — a new White House position — has been significantly more hawkish towards China and trade policy.

Trump was incredibly critical of trade deals during the campaign, particularly calling out China and Mexico for what he called “unfair” trade practices. During the campaign, Trump introduced an “America First” economic plan that focused on domestic production of goods rather than imports.

This sort of tariff — while significantly lower than the 45% tax proposed by Trump at one point during the campaign — has been cited by numerous Wall Street and academic economists as the biggest downside of Trump’s economic agenda. While the impact on economic growth may be slight, the possible retaliation from countries such as China could cause a costly trade war.

Tensions with the Chinese have already been heightened since the election of Trump after the president-elect spoke with Taiwanese president
Tsai Ing-wen, which was a violation of the US’ four decade One China policy. This was only exacerbated when a Chinese naval ship seized an unmanned US naval drone last week. On the economic front, Chinese officials have warned of retaliatory economic action in the event of a tariff from Trump.

The Trump transition team did not immediately respond to a request for comment.

NOW WATCH: Watch Yellen explain why the Federal Reserve decides to raise rates

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.