Tariffs have become an important topic related to the economy. Trump regularly insists that China is paying the tariffs. This has about as much validity as Mexico is paying for the wall. Trump often repeats this idea that China is paying the tariffs. It's easy to find definitions of tariffs. “A tariff is a tax imposed by one country on the goods and services imported from another country.” (1) "AA tariff is a tax imposed on foreign-made goods, paid by the importing business to its home country's government." (2 ). Tariffs are used to restrict imports. Simply put, they increase the price of goods and services purchased from another country, making them less attractive to domestic consumers. The point of tariffs is to discourage consumers from buying foreign products. It should be easy to understand that if China was paying the tariffs, that would not discourage any Americans from buying Chinese products. Why is that hard to understand? Yet candidates for the US president and vice president and millions of their supporters say that they believe that China pays the tariffs. It would appear that any high school graduate should be able to figure out that China does not pay the tariffs. . It has been frequently explained in the press (3). It has even been explained in the British press (4). Trump often repeats the idea that China is paying the tariffs (3, 9, 10). Trump claimed, “We have billions of dollars coming into our Treasury—billion—from China. We never had 10 cents coming into our Treasury; now we have billions coming in,"(4). This demonstrates that Trump is simply out of his mind. It appears silly and unnecessary but numerous people have discussed in fact checks this issue of China paying the Tariffs (5,6,7). Even the National Tax Payers Union fact-checked this (8). Even Peter Shiff, the gold bug who is always predicting a coming recession, has said that Trump can put tariffs on China; he can only impose tariffs on Americans who buy Chinese products(11). Trump has said that he is going to put tariffs on other countries (9). He can only put tariffs on products imported from other countries. And the importers pay the tariffs and pass the costs to the American consumers . At a Wisconsin rally trump said we are going to be a tariff nation. (10) VP candidate Vance said in late August that as a result of tariffs Trump imposed during his presidency, “prices went down for American citizens. They went up for the Chinese but they went down for our people,” Vance added. But that’s not true. The importing companies passed the tariff costs on to American consumers.
THE COSTS OF TARIFFS
Trump's tariffs caused a trade war with China, and it cost American consumers. The largest impact started near the end of 2018 (12). The Trump administration’s trade policies and tariffs reduced U.S. income at a rate of $1.4 billion per month by the end of November, according to new research from the Federal Reserve Bank of New York, Princeton, and Columbia universities (12b). The tariffs and resulting trade wars did produce some new jobs in a few areas and lost jobs in other areas. One estimate is that the resulting trade wars cost 245,000 jobs (12c). Studies suggest American consumers paid about $817,000 in higher prices attributable to the tariffs for every job created in the washing machine industry and $900,000 for every job created in the steel industry (13, 14). An analysis by the ST Louis FED suggested that the tariffs and resulting trade wars caused a loss of employment (15). Unemployment was already rising in some states by 2019 (16). Another analysis by the Federal Reserve Board demonstrated the negative effects on manufacturing employment and producer prices (17). The American economy was already going into recession in 2019 (18).By 2020, the negative effects of the economy from the tariffs and trade wars were completely obscured by the disastrous mismanagement of the COVID virus pandemic.
TRADE WARS HURT THE FARMERS MOST
American farmers were the biggest losers hurt by the Trump trade wars (19, 20, 21). Soybean farmers were hurt the most (22). Pig farmers were hit hard (22b). The result was that the US government had to compensate the farmers (22). The importing companies absorbed some of the tariff costs, but most of the costs were passed on to American consumers. The government spent the majority of the tariff money it received from importing companies to pay the farmers. But most of the government payments went to the large farmers, who were big corporations. Many small farmers lost out. There was an increase in farm bankruptcies and suicides for small farmers (24). By 2020, 40% of all income in the farm sector was coming from government subsidies (25). By 2021, farmers were flourishing under Biden and were recovering from the effects of the Trump trade wars (25b). By 2022, the trade war from tariffs was impacting inflation in two ways. Some products, like seafood, were more expensive due to import restrictions. Some products that were restricted from export had production reduced, causing increased prices (26). The tariffs were not popular last time (26b, 26c). They may be even more unpopular next time because alternate markets are more prepared to satisfy the extra demand for soybeans and grains with more output from Brazil and Argentina and demand for meat with more output from Australia, Europe, or South America.
THE BAILOUT
By mid-2019, the tariffs that American importer companies were paying were not enough to pay for the bailout of American farmers hurt by the trade war (27). The farm bailout cost more than double the auto bailout (28). The farm bailout cost more than the US nuclear forces (29). In some cases, the farm bailout money went to foreign companies operating in the US (30). By 2021, farmers were still struggling to get their exports back up to the level before the trade wars (31).
FUTURE TARIFFS
The Biden administration has retained most of the Trump tariffs. The Biden administration has added some tariffs focused on specific products, not blanket tariffs against countries. This has been tariffs on electric vehicles and strategic electronic components such as microchips. Higher tariffs are paid by the importing companies. Higher tariffs amount to an average annual tax increase on US households. Trump has proposed more high tariffs (32). Various groups have tried to calculate the impact of those proposed tax increases (33). The Tax Foundation estimates “the proposed tariff increases would hike taxes by another $524 billion annually and shrink GDP by at least 0.8 percent, the capital stock by 0.7 percent, and shrink employment by 684,000 full-time equivalent jobs. Our estimates do not capture the effects of retaliation nor the additional harms that would stem from starting a global trade war." The American Action Forum, a center-right think tank, has projected annual additional costs per household of $1,700 to $2,350 for the 10% tariff and an additional $1,950 if the 60% tariff on China is added. That would equal $3,650 to $4,300 for both tariffs, which aligns with Harris’ statement (34). Now farmers are worried again about another trade war with China, especially soybean and corn farmers (35, 36).. Trump recently gave a response about child care costs, where he seems to claim that tariffs will balance the budget and pay for all child care costs (37). Trump's most radical suggestion for tariffs is that he will raise the level of tariffs until they replace all income tax (38). . Tariffs are very regressive, like a sales tax on imports. . If that plan would work, then billionaires would eliminate all their income taxes, and the poor and middle-class consumers would be paying the costs. Treasury secretary Yellen says that to replace income taxes with tariffs would require a tariff rate more than 100% and would make life unaffordable for the typical American (39). This does not include the effect of retaliatory trade wars. America has seen the results of high tariffs before. After the 1929 crash, Herbert Hoover tried to protect American industries by signing the Smoot-Hawley Tariff Act, which sharply raised tariffs to a level not seen since 1828. The result was predictable, with other countries imposing retaliatory tariffs that crashed American exports and, from the point of view of historical consensus, deepened and lengthened the Great Depression. A group of 23 Nobel Prize-winning economists have criticized Trump's economic plans (40). The Peterson Institute for International Economics has said that “the effects of tariffs imposed in a second Trump presidency are incalculable. The damage to the US economy would also be incalculable, except in a later damage assessment. By then, it would be too late. (41).
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