By J. Simpson
Editor’s note: The opinions expressed here are those of the authors. View more opinion on ScoonTV
On Tuesday, March 11, press secretary Karoline Leavitt inadvertently revealed the chaos and confusion surrounding the Trump Administration’s tariff policies. During the press conference, AP reporter Josh Boak sought clarity on why President Trump seemed to be pivoting away from the tax cuts he promised on the campaign trail. In response, Leavitt answered
He’s actually not implementing tax hikes. Tariffs are a tax hike on foreign countries that have been ripping us off. Tariffs are a tax cut for the American people. And the president is a staunch advocate for tax cuts. As you know, he campaigned on ‘No taxes on tips, no taxes on overtime, no taxes on Social Security benefits.’ He is committed to all three of those things, and he expects Congress to pass them later this year.
Unfortunately, that’s not how tariffs work, according to some economists. Foreign companies aren’t the ones that pay taxes on imported goods. The businesses importing the goods are the ones who foot the bill. As the back-and-forth continued between Leavitt and Boak, the administration’s policy on foreign trade seems to be that the tariffs will force American businesses to prioritize American businesses, ultimately improving the economy. As Leavitt summarized,
And ultimately, when we have fair and balanced trade, which the American people have not seen in decades, as I said at the beginning, revenues will stay here, wages will go up, and our country will be made wealthy again.
That seems like either a gross oversimplification of a complex topic, wishful thinking, or an outright lie. Even Donald Trump acknowledges that tariffs can destabilize an economy, avoiding a question about whether or not raising tariffs would send the American economy plummeting into a recession. These fears seem warranted, as implementing tariffs immediately caused the affected countries to impose reciprocal tariffs of 25%. Trump’s tariff policies have already caused the DOW to sink by 500 points.
Considering the sharp market response, one has to wonder about the current administration’s devotion towards tariffs. Why is Donald Trump so adamant about taxing Canada, Mexico, and China specifically? Is it a misunderstanding of economic policy? Is it simply another cynical cash grab? With this administration, you never know for sure. To find out, we’re digging in to make some sense of Donald Trump’s tariff policies.
What Are Tariffs and How Do They Work?
A tariff is a charge imposed on goods and services imported from another country. These fees are generally paid by the company importing the goods. Traditionally, tariffs are a certain percentage of a product’s worth. A good imported from China worth $10 with a 20% tariff would mean an additional $2 surcharge. It’s up to each company to decide if they’ll pass this additional expense on to consumers or not. According to financial analysts, American consumers usually end up paying the price when tariffs are imposed.
The Trump Administration’s policy on tariffs suggests they believe that the financial strain of importing foreign goods will offer an opportunity for American companies to step in and fill the vacancy. What impact that will have on the consumer remains to be seen, considering the much lower cost of goods, services, and – most importantly – labor in other countries. The current system of cheap, low-quality plastic products from places like China filling the shelves of every Big Box retailer and supermarket isn’t working either, though.
Why Is Donald Trump So Obsessed With Tariffs?
President Trump’s fascination with tariffs is nothing new. It can be traced back to the 1980s when he was first considering a run for office. At the time, his ire was leveled against the Japanese, who were dominating the American economy, especially in cutting-edge technologies like electronics. After Japan’s economy cratered, he shifted his attention to China, which was becoming the next global manufacturing superpower. His attitudes were shaped by financial commentator Lou Dobbs, an outspoken critic of globalization, as revealed by Former White House Chief Strategist Steve Bannon in the PBS Documentary Trump’s Trade War. Considering his long-running grievances, President Trump does seem to legitimately believe that tariffs will bring jobs back to American soil.
Officially, President Trump claims that tariffs will boost manufacturing and protect American jobs, increase tax revenue, and grow the domestic economy. Given his recent condemnation of the CHIPS Act, a popular bipartisan bill signed by Joe Biden in 2022 authorizing $280 billion in Federal funding to support American manufacturing of microchips and semiconductors, the real answer isn’t so simple.
There is reason to believe that President Trump may be using tariffs to punish countries resistant to the current administration’s policies. Vice President JD Vance claimed during a press conference at the Southern Border that the tariffs were being implemented due to illegal immigration and drug trafficking, particularly of Fentanyl, a powerful synthetic opioid that’s been ravaging the country in recent years. President Trump immediately backed off of his claim that there would be no exemptions to the tariffs when it was announced that both Canada and Mexico would escalate border security. He has said since that tariffs on certain products could be raised even higher, suggesting they’re possibly another tool for the Trump administration to get foreign governments to play ball.
Possible Effects of Trump’s Tariffs
Unsurprisingly, every country targeted by President Trump’s tariffs immediately instituted retaliatory tariffs. China levied a 15% tariff on several U.S. agricultural imports, including chicken, pork, beef, and soy. They also added two dozen American companies to the list subject to export controls and additional restrictions. Canadian Prime Minister Justin Trudeau committed to imposing tariffs on over $100 billion of American goods over 21 days.
As we have shown, American consumers are most likely to experience hardship from the tariffs. Analysts at the bipartisan Tax Foundation predict an average increase of $1,072 per American household. They also anticipate the United States GDP contracting by .4% and decreased hours for 309,000 full-time jobs.
American manufacturing and retail also stand to take a hit. The tariff on Chinese products will raise prices on everything from microchips and semiconductors to plastic components. Automotive parts could be affected, too, causing even more grief to the already-suffering American automotive industry. This will also raise prices at popular Big Box retailers like Target and Best Buy.
The tariffs could cause grocery prices to soar even higher than they already are. Mexico provides roughly two-thirds of U.S. vegetable imports and about half of U.S. fruit and tree nut imports according to the United States Department of Agriculture. That means higher prices on tomatoes, bell peppers, raspberries, and strawberries. It could mean skyrocketing prices on avocados, too, seeing as how Mexico supplies more than 90% of avocados consumed in the United States.
Last but not least, the construction industry could suffer even more under President Trump’s tariffs. Over 70% of softwood lumber and gypsum, the material used for drywall, come from Canada and Mexico. Steel and aluminum are also used extensively in construction, both of which are targeted specifically by the tariffs. Not only will this cut into the profit margins of construction firms and contractors, but it will also continue to raise housing prices. So much for cheap groceries and housing.
Only one thing is certain with the current administration. We’re going to have to keep paying close attention while waiting to see what happens. President Trump and his cabinet frequently reverse positions, sometimes on the same day. It’s unclear if they’re simply spouting sensationalist rhetoric, responding emotionally, grifting, or making up policy as they go along.
President Trump has been touting tariffs as a solution to the globalized economy for almost 40 years, he does seem committed to the idea that tariffs are the answer to the modern globalized economy. While it remains to be seen if the last few weeks of walking back tariffs and offering exemptions is merely a result of a very complicated issue, a political smokescreen, or a way to grant sweetheart deals, it’s beyond obvious something has to be done. Given his long fascination with the topic, it’s worth withholding judgment and suspending cynicism for a time to see how the tariffs work. And considering Trump’s decades-long commitment to tariffs, neither American consumers nor businesses have much choice.
