Donald Trump, the former president and current Republican nominee, has proposed imposing huge new tariffs on foreign goods entering the United States. He believes that tariffs, essentially import taxes, will create more factory jobs, reduce the federal deficit, lower food prices and allow the government to subsidize childcare. Trump’s plan includes a 60% tariff on goods from China and up to 20% on everything else the US imports.
How Tariffs Work
Tariffs are typically charged as a percentage of the price a buyer pays a foreign seller. In the US, tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the country. Tariff rates vary from 2.5% for passenger cars to 6% for golf shoes. Countries with trade agreements with the US, like Mexico and Canada, enjoy lower or no tariffs.
Who Pays Tariffs?
Contrary to Trump’s claims, tariffs are paid by American companies, not foreign countries. These companies then pass their higher costs on to consumers through increased prices. Tariffs can hurt foreign countries by making their products pricier and harder to sell abroad.
Purpose of Tariffs
Tariffs aim to protect domestic industries by raising import prices. They can also punish foreign countries for unfair trade practices. Historically, tariffs were a significant revenue source for the US government, accounting for 90% of federal revenue from 1790 to 1860.
Expert Opinion and Potential Impact
Mainstream economists are skeptical of tariffs, considering them inefficient for promoting prosperity. The Peterson Institute for International Economics reports that Trump’s proposed tariffs could slash over a percentage point off the US economy by 2026 and increase inflation by 2 percentage points. Economists at MIT, the University of Zurich, Harvard and the World Bank found that Trump’s tariffs failed to restore jobs to the American heartland and had negative employment impacts, especially for farmers.
Political Implications
Despite the potential economic drawbacks, Trump’s tariff plan has been successful as politics. Support for Trump and Republican congressional candidates rose in areas exposed to import tariffs, particularly in the industrial Midwest and Southern states. The Biden-Harris administration has also implemented tariffs, retaining taxes on $360 billion in Chinese goods and imposing a 100% tariff on Chinese electric vehicles. Donald Trump’s proposed tariffs aim to protect domestic industries and promote American jobs. However, experts warn of potential economic drawbacks, including increased prices, reduced choices and retaliation from foreign countries. As the debate surrounding tariffs continues, understanding their impact on the US economy and global trade remains crucial.
