Trump is hung up on trade wars. His new plan to lower taxes by raising tariffs will hurt, not help, consumers.
After hearing news of Donald Trump’s latest campaign proposal to lower income taxes by raising tariffs on imported goods, I’ve concluded that the ex-prez will never grasp the mechanics of tariffs.
Trump must not understand that tariffs are paid for by Americans. Here’s how it works. When the U.S. imposes tariffs on a product, the importing U.S. business pays an import tax directly to the U.S. government when it buys that product. It then adds the amount of the import tax to the product once it distributes it, which means that consumers ultimately pay that tariff.
End result? What consumers were supposed to have saved in taxes is actually spent on higher prices for imported goods.
To put it in somewhat less technical terms, gains from the tax cut go “pffft.”
It’s true that foreign producers may reduce the cost of the products they ship to the United States in order to keep them competitive, but that’s conjectural and as a practical matter hasn’t seem to have occurred during recent tariff increases. The non-partisan, non-profit Tax Foundation cites several recent studies that conclude American consumers pay for the bulk of tariffs imposed by the U.S. government.
CNBC contributor Ron Insana has written a lucid article on the matter explaining how Trump’s tariff proposal could “rattle the economy.” The Peterson Institute, another non-profit, non-partisan research organization notes that the plan “would hurt low income Americans the most.”
Me? I don’t like it because I’m an old-school Republican (I quit the party when Trump was inaugurated in ‘17) who happens to think free-trade is the vehicle that moves the global economy forward, raising the international economic tide for everyone.
In my view, when it comes to tariffs, the fewer the better.
As to the practical consequences of Trump’s fixation of tariffs, we all saw what happened during Trump’s poorly thought out “trade war” (its inauguration in 2017 is pictured in the public domain image above, with Trump’s trade director Peter Navarro behind the podium, as posted in wikimedia commons) with China, when that country’s retaliatory response – stopping purchases of American farm products – brought grain markets to their knees. It was a potential industry-killer for American farmers who were bailed out by the Trump administration’s payoffs to producers in the form of taxpayer funded “mitigation payments”.
Trump’s saber-rattling rhetoric on tariffs didn’t end well the first time. I doubt a second go-round would fare any better.
John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for 20 years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radioman in Vietnam. Reprint with permission.
