Examining Trump’s Tariff Plan
To the editor:
Former President Donald Trump is saying he will impose additional tariffs on imported goods if he is elected to the presidency a second time. When he was in the White House from 20172021, his tariffs imposed then are estimated to have cost Americans about $80 billion a year in taxes alone, or $600 per household annually in the USA.
Economists of all political persuasions are in agreement that the proposed new tariffs, driving the tax on imports even higher, is likely to increase overall costs to consumers still more, with estimates varying from $2,500 to $4,000 per household, the upper end being the one touted by Vice-President Harris in early September at the presidential debate.
President Trump seems to believe that if the US government places a tax on a good being imported into the US, we can “make China pay” somehow, and that the money is collected from the foreign company selling the good, but that is not how import taxes work, dear readers. When the tax is imposed, the importing company (the domestic seller we will buy from) is responsible for paying the fees, and the tax is added then to the retail price of the good.
Now assuredly, the economic theory does predict that fewer of the items will be sold at this higher price, and thus that loss in quantity sold of some units will hurt the exporting company and country, but they are not the ones shelling out to make the payments for the tax to the US government. Ultimately, the tax dollars come out of the pockets of consumers who buy the items.
One good thing from the tariff being imposed at a higher level on all imports is that we will have higher government revenues to cover the federal government deficits, but that’s not a good argument for putting tariffs in place, for such taxes often have other consequences that economists almost universally agree are terrible for the economy.
First, other governments retaliate with tariffs on our goods being sent there. That often means fewer of our goods demanded, so we end up with workers here being laid off. The retaliatory tariffs often spread around the world, affecting trade in goods we never expected to be involved, and harming international relations, lowering employment, and driving the entire world into recession. In fact, the “trade wars” of high tariffs on imports in the early 1930’s may well have been a major reason for the rapid worsening of the Great Depression all around the world.
Second, tariffs on imports are effectively a protection for inefficient domestic producers of the good being taxed when brought in from firms operating abroad. Foreign competition free of tariffs is often good for a home country’s industry, spurring more investment in better technology, more efficient production methods, better training for workers, as happened to some of the US auto manufacturers when European and Japanese car imports first appeared. We need that healthy competition for higher quality goods.
Third, tariffs are inflationary, causing our own firms making the same product to raise their prices to consumers also. This is not good in any way for the domestic economy. Thus, tariffs don’t work well, with very rare exceptions, such as maybe an export tariff on a good for which the government wants to keep the product all for its own consumers. However, even in that case, the cost of enforcement at the borders is often prohibitively expensive with cost exceeding the tax revenue raised.
Better to keep tariffs minimal on international trade, to keep employment strong, inflation down, and competition healthy. Be skeptical of presidential politics and economic policy, dear readers. Remember: the president’s real power over the economy is to speak optimistically about the future outlook, for our own beliefs about the future are what drive the future. A good outlook creates optimism, and that leads to economic decisions by both businesses and consumers that are good for all of us.
Annette Citzler La Grange