Donald Trump, the president-elect, has proposed imposing significant new tariffs on foreign goods entering the US as a panacea for America’s problems.
In an attempt to combat illegal immigration and drug use, Trump shocked both the country’s northern and southern borders on Monday by promising to impose massive new taxes on China, Canada, and Mexico as soon as he enters office.
Trump blasted an inflow of illegal immigration in two tweets on his Truth Social website, despite the fact that southern border apprehensions have been close to four-year lows.
One of his first executive orders, he added, would be to levy a 25% tax on all goods coming into the country from Canada and Mexico, and an additional 10% tariff on items coming from China.
He declared that until drugs, especially fentanyl, and all illegal aliens halt their invasion of our country, the additional tariffs would stay in effect.
The president-elect claims that tariffs, which are essentially import levies, will reduce food costs, increase industrial jobs, reduce the federal deficit, and enable the government to fund daycare.
Most economists are dubious because they believe that tariffs are a largely ineffective means of government revenue collection. They are particularly concerned about Trump’s most recent tariff proposals.
According to experts Carl B. Weinberg and Rubeela Farooqi of High Frequency Economics, food supplies, cars, and electricity would be especially heavily hit on Tuesday.
According to Weinberg and Farooqi, imposing tariffs on trade flows into the US without first arranging for substitute suppliers for the impacted commodities and services will immediately increase the cost of imported goods. Households will become poorer because many of these items are consumer products.
According to High Frequency Economics, the threats are a weapon to force certain modifications along the borders and for imports from China, Canada, and Mexico rather than to support new trade policy.
During her unsuccessful presidential campaign, Vice President Kamala Harris denounced Trump’s tariff threats as insignificant; yet, the Biden-Harris government kept the penalties the Trump administration levied on $360 billion worth of Chinese goods. Additionally, it levied a 100% duty on electric cars made in China.
In fact, the United States has been progressively retreating from its post-World War II stance of advocating for free trade and reduced tariffs on a worldwide scale in recent years. This change has been a reaction to the loss of manufacturing employment in the United States, which is generally ascribed to free trade and China’s growing aggression.
Tariffs are a tax on imports
Usually, they are assessed as a percentage of the purchase price that a buyer makes from a foreign vendor. At 328 ports of entry throughout the United States, Customs and Border Protection officers collect duties.
Golf shoes have a 6% charge, whereas passenger cars have a 2.5% tariff. For nations with which the US has trade agreements, tariffs may be reduced. For instance, Trump’s US-Mexico-Canada trade pact allows the majority of commodities to travel freely between the US, Mexico, and Canada.
There s much misinformation about who actually pays tariffs
Trump is certain that foreign nations foot the bill for tariffs. Actually, American corporations who import goods pay the tariffs, and the U.S. Treasury receives the money. These businesses then usually raise prices for their clients in order to cover their increased expenses. Economists claim that because of this, consumers typically bear the cost of tariffs.
However, by raising the cost of their goods and making them more difficult to export elsewhere, tariffs can harm other nations. In a research, Yang Zhou, an economist at Fudan University in Shanghai, found that Trump’s tariffs on Chinese goods hurt the Chinese economy more than three times as much as they hurt the American economy.
Tariffs are intended mainly to protect domestic industries
Tariffs can shield domestic producers by driving up the cost of imports. Additionally, they could be used to penalize foreign nations that engage in unfair trade practices, such as dumping goods at unreasonably cheap costs or subsidizing their exporters.
Prior to the creation of the federal income tax in 1913, tariffs were a significant source of government revenue. Economist Douglas Irwin of Dartmouth College, who has researched the history of trade policy, says tariffs generated 90% of federal revenue between 1790 and 1860.
After World War II, as international trade increased, tariffs lost favor. To fund its operations, the government need much larger sources of income.
Tariffs and taxes are estimated to bring in $81.4 billion for the government in the fiscal year that concluded on September 30. That pales in comparison to the $1.7 trillion from Social Security and Medicare taxes and the $2.5 trillion anticipated from individual income taxes.
Nevertheless, Trump intends to implement a budgetary policy that is similar to that of the 19th century.
He has maintained that by supporting American farmers, levies on agricultural imports might reduce food prices. In fact, by limiting customer options and American businesses’ ability to compete, tariffs on imported food items would most likely result in higher supermarket prices.
Additionally, tariffs can be used to exert pressure on other nations on matters that may or may not be connected to trade. For instance, Trump pushed Mexico to crack down on waves of Central American migrants traveling to the United States through Mexico in 2019 by threatening tariffs.
Trump even believes that tariffs can stop wars.
He claimed, “I can do it with a phone call,” during a rally in North Carolina in August.
He indicated he would send a threat if another nation attempted to launch a war:
You will be charged 100% tariffs. And suddenly, the dictator, president, prime minister, or whatever the heck is in charge of the nation tells me, “Sir, we won’t go to war.”
Economists generally consider tariffs self-defeating
For businesses and individuals who depend on imports, tariffs increase expenses. Additionally, they are likely to incite reprisals.
For instance, the European Union retaliated against Trump’s steel and aluminum tariffs by imposing taxes on American goods, ranging from Harley-Davidson motorbikes to bourbon. Similarly, in an effort to harm Trump’s supporters in the agricultural region, China retaliated to his trade war by imposing tariffs on American exports, such as pork and soybeans.
According to a study conducted by economists from the World Bank, Harvard, the University of Zurich, and the Massachusetts Institute of Technology, Trump’s tariffs did not succeed in bringing employment back to the American heartland. According to the report, when the tariffs were intended to protect jobs, they had no effect on U.S. employment.
For instance, the number of jobs at U.S. steel facilities hardly changed—they stayed at about 140,000—despite Trump’s 2018 taxes on imported steel. In contrast, Walmart alone has 1.6 million employees in the US.
Even worse, the study discovered that retaliatory levies levied by China and other countries on American commodities had a detrimental effect on employment, particularly for farmers. The billions of dollars in government assistance that Trump gave to farmers only partially offset these retaliatory tariffs. Businesses that depended on certain imports were also harmed by the Trump tariffs.
Even though Trump’s trade war failed as a policy, it was a political success. The industrial Midwest and manufacturing-heavy Southern states like North Carolina and Tennessee, which were most affected by the import tariffs, saw increases in support for Trump and Republican congressional candidates, according to the report.
— The Associated Press’s Paul Wiseman
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