Donald Trump said “Tariffs” are “The most beautiful words in the dictionary. “In the first few months of his tenure, the president provided Americans with many reasons to Google the definition of the term.
Trump has announced tariffs since January 20 Steel and aluminum Made outside the United States, all products are manufactured Canada or Mexico,,,,, All Chinese productsand All foreign-made carsamong other things. On April 2 – Trump calls it a date “Liberation Day” – He vowed to impose reciprocity tariffs on all countries It is allegedly unfavorable U.S. products are made through trade, taxation or regulatory policies.
The president’s prolific and casual tariff statement has been Storage tank stock marketsour taste Consumer sentimentand Excited some long-term critics Globalization.
Meanwhile, they left behind some caring and confused Americans. It can be said that tariffs have nothing to do with the US economy for nearly a century. It is understandable that many people are unsure what tariffs are, how they affect consumers, why the government enforces these tariffs, and whether the president’s policies will be carried out on their own terms.
Here is the short answer: Tariffs are taxes on imported goods. They usually make affected consumer products more expensive. In theory, well-designed tariffs will also encourage targeted industries to produce more in the United States. And producing certain commodities at home, rather than importing from abroad, may have national security or economic interests. Trump has many reasons for his tariffs, and has changed: The president sees them as tools to increase income, strengthen national security and revitalize the U.S. economy by increasing domestic manufacturing efforts. But the president’s tariffs are so widespread, high and constantly changing that they may actually backfire.
What is tariff? How will they affect consumers?
To understand what tariffs are and how they work – it is helpful to consider a specific example. On April 3, Trump will impose a 25% tariff on all cars outside the United States. This means that businesses that import foreign cars, such as car dealerships, will be required to pay a 25% tax on each foreign vehicle they purchase.
When the cost of a business rises, it is usually compensated by raising the price. The President actually need His automatic tariffs to increase the price of foreign cars: The official purpose of this tariff is to encourage Americans to buy more domestically produced cars so that more automakers can position production in the United States. If tariffs don’t make foreign-made cars expensive to American consumers, they won’t give them any motivation.Buy Americans. ”
In fact, Trump’s automatic tariffs may increase all Automobile, including American-made cars. This is for two reasons: First, U.S. automakers need to pay tariffs on foreign-made auto parts. Second, American auto companies will face weaker competition. Previously, U.S. automakers were unable to raise prices without worrying that doing so would lead to potential customers buying German, Japanese or Korean cars. Trump’s tariffs make this problem much less.
For these reasons, economists estimate Trump’s tariffs will raise U.S. car prices $4,000 and $15,000 per vehicle.
These same basic motivations apply to tariffs on other commodities. U.S. retailers who import such equipment will raise prices for foreign-made washing machines. Meanwhile, U.S. washing machine manufacturers will be able to charge more due to weak competition.
This actually happened: in 2018, Trump imposed tariffs on washing machines and did not take effect until 2023. During the four years of meeting these tariffs, the cost of laundry equipment in the United States is in the United States Up 34%higher than the total inflation rate during this period.
Trump’s current tariff preparations have a greater impact on Americans’ finances. Trump’s tariffs on Canada, Mexico and China could reduce disposable income for ordinary American households, according to latest estimates from Yale University’s Budget Laboratory Up to $2,000.
If tariffs hurt consumers, why would the government impose them? What are the benefits of tariffs?
There is no doubt that tariffs are harmful to consumers. But in theory, they can still serve the interests of a country in at least three ways:
• By generating income. Since tariffs are taxes, they provide the government with income that can be used to repay debts or capital expenditures. The U.S. government actually uses tariffs as the main source of income for the Republic Founded until the Civil War. However, since the federal income tax was proposed in 1913, tariffs have become an increasingly insignificant source of funding for the government.
Donald Trump said he wanted to change that. In fact, he called for Replace income tax with tariffs. His government claims its automatic tariffs will bring Revenue this year is $100 billion.
• By cultivating high-priced family industry. Many countries have successfully used tariffs to promote economic development.
For example, since the 1960s, South Korea attempted to establish its domestic automotive industry. However, it is difficult to get such an industry out of the ground. During the first few years of operations, South Korean automakers had little hope to produce cars that compete with foreign quality or price. By placement High tariffs On foreign-made cars, the South Korean government ensures that its domestic automakers will provide a market for cars with insufficient vehicles. Today, Korean brands such as Kia and Hyundai are competitive globally.
Today, the U.S. auto industry is much more mature than South Korea in the 1960s. But American automakers can’t Make electric cars as efficient as possible. Economists disagree whether it is important to the United States to have a globally competitive EV sector. But if we do want to cultivate our electric vehicle industry, then the high tariffs on electric vehicles in China make sense – because Joe Biden and trump card Have done it.
• By improving national security. Some commodities and commodities have military value. Relying on foreign countries’ steel, ammunition, advanced semiconductors or various other technologies could undermine a country’s national security – after all, in a conflict, foreign countries could stifle the U.S.’s opportunity to obtain military valuable technology in the United States. Many of Trump’s tariffs are Officially planned In order to enhance the United States’ ability to produce the necessary materials for the war.
How did the recent government use tariffs?
The United States used tariffs to cultivate its baby industry in the 19th and early 20th centuries. But after World War II, the United States pursued public exchanges across borders.
In most parts of Europe, U.S. manufacturers can dominate the global industry without tariffs. Meanwhile, the U.S. foreign policy agencies worry that if communism fails to successfully rebuild the industrial economy, communism will be rooted in Western Europe and Japan. Therefore, in order to promote healthy capitalist growth abroad – while reducing American prices – the United States pursues lower tariffs.
The United States does occasionally impose new tariffs between World War II and Trump’s first election. For example, in 1987, Ronald Reagan Offer 100% tariff After Japan blocked US-made semiconductors, on Japanese computers, TVs and power tools. But the overall direction of U.S. trade policy between President Harry Truman and Trump’s first term is to move towards free trade.
What impact will Trump’s tariffs have?
Unfortunately, Trump’s tariffs seem unlikely to generate reliable revenue, strengthening U.S. manufacturing or improving U.S. national security. (and their odds to push Trump Special trade policy objectivesfor example, forcing Canada to become the 51st state, or even slimmer. )
There is a simple problem with tariffs as a source of income: the more tariffs encourage consumers to buy goods produced domestically, the less they will earn. For example, if the tariffs on foreign cars cause everyone to buy U.S. vehicles, then the tariffs on cars will stop generating revenue. So to provide a stable source of income for Trump’s tariffs, they would need to be so low that importers continue to buy large quantities of foreign-made goods (and thus pay taxes).
But Trump has high tariffs in many departments precisely because he wants Americans to buy less foreign-made goods. Therefore, the President’s tariffs cannot be reasonably provided A sufficiently consistent income arrive Offset his proposed tax cut (not to mention completely replacing federal income tax).
At the same time, his tariffs can actually harm Made in the United States at least three reasons:
• First, Trump’s tariffs apply to large industrial inputs, such as metals, energy and electronics. This will increase costs for U.S. manufacturers, forcing them to raise prices, which will make their products less attractive to foreign consumers. In addition, the tariffs invested will give companies the incentive to locate their factories in other countries where they do not have to pay a 25% tax on parts and materials made in Canada or Mexico.
• Second, Trump’s tariffs will reduce the actual wages of American workers. If the disposable income of the average U.S. household fell by $2,000, the household could spend less money on goods. This may ultimately reduce the demand for American-made products.
Indeed, market research company Cox Auto believe That’s exactly what will happen to Trump’s car tariffs. In its analysis, U.S. auto factories may have to cut production by 30% as consumers will cope with price increases by delaying their purchases.
• Third, foreign countries are revenge Trump’s trade policy has imposed tariffs on goods made in the United States. This will limit global sales of U.S. manufacturers. This is especially true in the most innovative and advanced industries in the United States drug,,,,, Chemicalsand Medical equipmentwhich is more likely to sell its goods worldwide.
For these reasons, we have seen Trump’s tariffs backfire. according to 2019 Federal Reserve Analysisthe tariffs imposed by Trump during his first term reduce Manufacturing jobs in affected industries.
Finally, the assumption of tariffs is suspicious. US security may depend more on a strong international alliance than on The amount of steel we produce at home. Trump’s tariffs have Confronting America’s closest allies When destroying our country’s credibility as a dealer: In 2018, Trump himself reached Trade Agreement with the governments of Canada and Mexico. However, this year, he is still imposing a 25% tariff on both countries on direct violations of his trade agreement.
If the United States is unwilling to comply with the terms of its agreement, other countries have fewer motivations to work with us.
All in all, Trump’s tariffs could raise prices, weaken U.S. manufacturers, and undermine U.S. alliances and global influence.
How long will Trump’s tariffs take effect?
It is unclear how Trump’s tariffs will prove. The president has already put some duties, such as his 25% tariff on Canada and Mexico, into one Potential temporary bargaining chips Negotiations on trade and border security. But he suggested that others would be permanent.
With the cost of Trump’s trade policy toward U.S. consumers and manufacturers, the administration may decide that its agenda is politically unsustainable. The president’s tariffs are already deeply unpopular, with 61% of voters disapproving of them CNN’s recent polls.
