First of all, let’s define a tariff. Per the Merriam-Webster Dictionary, a tariff is a schedule of duties imposed on imported goods or in some countries exported goods. In effect, a tariff as it relates to goods imported into the US is a tax on imported goods. Unfortunately, there is a significant amount of disinformation surrounding who ultimately pays the tariff on imported goods.
Donald Trump has stated numerous times that foreign countries pay the tariffs on products imported into this country. Karoline Leavitt, Trump’s press secretary, continues to trumpet (no pun intended) Trump’s statement that foreign countries pay the tariffs on products imported into this country. READ MY LIPS, THIS IS DISINFORMATION!
The company that imports product into the U.S. pays the tariffs on all imports. The amount of the tariff could be 10%, 15%, 20%, 25% or more of the cost of the imported product. The downside for the U.S. consumer is that the importer typically passes some if not all of the cost of the tariff to the consumer. This is bad news for the consumer because high prices were a key issue in the Presidential election won by Donald Trump and impacted key House and Senate races with Republicans taking or keeping the majority in both houses.
Donald Trump considers implementing tariffs on imported goods a money-making proposition. Donald Trump says he believes tariffs are a tool to reinvigorate manufacturing in the U.S., while attempting to exact economic retribution on foreign nations including our closest allies. Trump also believes that tariffs will make the U.S. rich by bringing in billions or even trillions of dollars into government coffers. Those billions and trillions of dollars will be coming directly from the pockets of the poor and the middle class.
Trump’s tariffs have targeted Canadian exports including steel, aluminum, lumber and energy, and the auto industry. After threatening a 50% tariff in early March on the country’s steel and aluminum, Trump reduced it to 25% days later after Canada retaliated, then pushed to April 2 the full 50% tariff.
Canada isn’t taking it on the chin and has retaliated by announcing retaliatory trade duties on $21B worth of U.S. goods in response to Trump’s tariffs. These tariffs include a slew of products including vegetables, fruits, nuts, meat, fish, poultry including eggs and dozens of other products. Additionally, Canada has taken all U.S. whiskey off of the shelves in an effort to hurt red states economically.
The European Union is retaliating against the U.S.’s 25% tariffs on European aluminum and steel by implementing tariff’s on approximately $28B worth of U.S. exports, including whisky and soybeans, set to take effect on April 13th. Trump is now threatening to increase tariffs to 200% on European spirits unless Europe drops tariffs on U.S. exports. If you like Hennessy Cognac, you better take notice because it is distilled in France. It undergoes a meticulous fermentation and double-distillation process. Don’t ask me how I know that.
The U.S. hit China with 10% tariffs in February and increased it to 20% citing the flow of fentanyl from China into the U.S. In retaliation, China imposed between 10% to 15% tariffs on a multitude of U.S. exports including chicken, wheat, corn, cotton, pork, beef and dozens of other meats, aquatic and agricultural products.
China says that they are ready for a trade war or any other war that the U.S. wants to engage in. China is not playing games. During the tariff war in Trump’s first term, China significantly reduced purchases of agricultural goods including soybeans that negatively impacted farmers to the point that the Trump had to provide federal subsidies to farmers. With Trump’s new tariff war, the U.S. may be moving in that direction again.
Expect prices for produce, meat and many other products sourced from Mexico to jump relatively quickly due to Trump’s 25% across the board tariffs. Mexico accounts for 63% of vegetable and 47% of fruit and nut exports to the U.S. When you add in Mexican manufactured automobile and automobile car parts, if the Trump tariffs are implemented, the impact to the U.S. consumer will be significant economically.
April 2nd will be a key day for the implementation of many of Trump’s tariffs. Prices will rise on many products within several weeks to as early as few days. Aluminum and steel tariffs will be quite damaging to the auto industry. Current estimates indicate that prices for new cars could rise from $3,000 to $10,000 depending on make and model.
Well, we can’t sugar coat this, prices will rise and maybe quite significantly in a relatively short period of time. The U.S. is entering into a trade war with effectively most of the whole world, and unfortunately, no one wins a trade war, you only have losers. The economic impact will affect the poor and middle class the most by far. It doesn’t matter if you are liberal or conservative, leftist or maga, gay or straight, we will all be in this same boat. Ironically, economics may be a backhanded way of unifying the country.
All opinions herein are solely the opinions of Herb Booker. Comments are welcome and can be sent to hbooker2@yahoo.com, or at the bottom of this page. Next week, “An Administration Flying By the Seat of It’s Pants”.