Many voters state they prefer former president Trump in this election for the economy and immigration, both of which are complicated issues. Here, I am addressing the economy only. Former president Trump has made it explicitly clear that his economic policy is going to be based on Tariffs. What are tariffs exactly and how do they impact a country’s economy, and, more specifically, each of us?
Let’s say our government imposes a 20% tariff on all goods imported from Mexico. In 2023, we imported $20.39 billion worth of edible fruits and vegetables from Mexico. Their growing season goes further into our winter and starts earlier in our spring, extending our ability to purchase fresh produce. Now we have a tariff on that $20.39 billion. First of all, who pays the tariff ? It is NOT Mexico. American import companies pay the tariff and administrative fees to the U.S. Customs and Border Protection (CBP) agency. The importers submit paperwork declaring what, how much, and the value of what they are importing, among other information; the CBP determines what the amount of the tariff and other related fees are due, collects that amount, and yes, it goes into the U.S. general fund.
What happens next is critical, and that’s the part many either ignore or don’t know. What do you think the companies do with the increased cost of the tariffs? Of course, they raise their prices. Who pays the increased cost? We do. It’s estimated that Trump’s tariffs will cost the American consumer a minimum of $2,600 and up to $4,000+ more per year, with higher impact on the middle and lower economic classes. The first estimate is from the Peterson Institute for International Economics (PIIE), which is an independent nonprofit, nonpartisan research organization dedicated to strengthening prosperity and human welfare in the global economy through expert analysis and practical policy solutions, per their website (https://www.piie.com/about-piie).
The Cato Institute’s mission is to increase the understanding of public policies based on the principles of limited government, free markets, individual liberty, and peace (https://www.cato.org/). “Tariffs are costly taxes, and economists consider them to be poor tools for boosting the economy, reducing the trade deficit, or achieving strategic objectives….Despite the former president’s claims to the contrary, however, there is overwhelming evidence that Americans bore the brunt of his tariffs—and would do so again if he is reelected and fulfills his campaign pledge to impose more aggressive protectionism. More than a dozen academic studies by university economists, think tanks, and government agencies have examined the tariffs that the Trump administration imposed (and, unfortunately, that the Biden administration has mostly maintained).
Their conclusions are clear and consistent: “American consumers (both firms and individuals), not foreigners, paid for—and continue to pay for—the tariffs.”
The Tax Foundation is a leading nonpartisan tax policy nonprofit, with a mission “to improve lives through tax policies that lead to greater economic growth and opportunity.” (https://taxfoundation.org/about-us/). Their estimate of the impact of Trump’s proposed tariffs to replace income tax is impossible and “completely unrealistic.” “To replace the roughly $2 trillion of revenue raised by the individual income tax with tariffs would require astronomically high tariff rates….Historical evidence and recent studies show that tariffs are taxes that raise prices and reduce available quantities of goods and services for U.S. businesses and consumers, which results in lower income, reduced employment, and lower economic output. For example, the effects of higher steel prices, largely a result of the 2002 Bush steel tariffs, led to a loss of nearly 200,000 jobs in the steel-consuming sector, a loss larger than the total employment in the steel-producing sector at the time. It’s also worth noting that measures of trade flows, such as the trade balance, are accounting identities and should not be misunderstood to be indicators of economic health. The Trump tariffs (from 2017-2021) have failed in their objective to bring better trading practices and instead brought about economic damage.”
In addition to the fact that foreign governments do NOT pay tariffs, US import companies do and those higher costs are passed on to us; tariffs raise inflation, again raising prices for the American consumer; usually initiate tariff/trade wars, further destabilizing the U.S. and world economies; create declines in domestic output and productivity; result in higher unemployment; result in higher income inequity, as the middle and lower classes are impacted more.
There is repeated historical data to back up these tariff impacts. These are facts.
All of these institutes (think tanks) have shown with their work and publications that they are clearly nonpartisan and are concerned with government policy particularly emphasizing economics. They criticize President Biden also for his continuation of many of former President Trump’s tariff policies.