Trump's Tariffs: Bad Idea, Worse Execution:
What even is a tariff?
A tariff is a tax put in place by the government on goods from a specific country or territory. This tax is paid by the importers of the goods. This usually means that the importer will either eat the cost of the tariff and have lower profit margins (which encourages businesses to work elsewhere to keep higher profit margins) or raise the costs of goods to keep the same profit margin. Contrary to the common misconception, the government of the country receiving the tariff does not pay the tariff. Like all taxes, the money made goes to the government. Tariffs increase the prices of goods and make the government money. Tariffs are just a hidden tax and therefore increasing tariffs and increasing taxes have virtually the same impact on the average working-class individual.
Trump’s use of tariffs:
Trump’s second term has already had a complicated relationship with tariffs. His use of tariffs has already been much more sporadic than the vast majority of leaders throughout history. On April 2nd, the day that Trump decided should be referred to as “Liberation Day,” a large series of tariffs were unveiled by Trump that apply to the majority of our allies and enemies alike. Trump has given many different reasons for these new tariffs, including but not limited to bringing manufacturing back to America, creating new jobs in our country, and stopping America from being “looted, pillaged, raped, and plundered” by the European Union. So, will these tariffs bring economic strength to America? There are four key reasons why they won’t, and are already negatively impacting the country. These reasons are that trade protectionist policies need to be prepared for, focused on specific sectors, and have a robust system for deciding how extreme the tariffs are; additionally, this exact strategy is used by some other countries historically and currently, and they have not worked.
Why these tariffs are bad on paper:
It is not uncommon for countries to put tariffs on foreign goods to try to protect domestic industries. To do this a country would typically announce the tariffs for a far-off date to give business owners time to make plans. Trump thinks his tariffs will protect domestic industries, but one problem with the way he executed his tariff plan was that he did not give business owners nearly enough time to react. Tariffs’ protection of domestic industries is dependent on companies deciding to start building factories domestically to get around the import tariff. However, because Trump decided to unveil his tariffs, and immediately impose them on Liberation Day, corporations do not have enough time to create the necessary infrastructure to train a construction group, build a factory, train a manufacturing workforce, and begin to manufacture before the tariffs go into effect. Until these foreign companies can take all of those steps, Trump's tariffs will not bring manufacturers to America, they only tax goods on American citizens. This could have been easily avoided by announcing the exact tariff amounts months or even years before enacting them. Trump, however, enacted them on the same day as his announcement.
Tariffing to create manufacturing jobs also needs to be targeted to specific industries. Trump has decided to put a tariff on all goods from these foreign countries instead. This is going to negatively affect America because there isn’t a way for America to produce all of the goods that these countries do. Trump could have focused on tariffing specific sectors to bring manufacturing jobs to America, instead of casting a net too wide that will not allow the domestic companies of one nation to compensate for every sector in every foreign economy. In addition, It is not even possible for America to produce goods from some of these sectors. America will never be able to produce enough bananas due to weather conditions, for example. This effectively means that bananas (and many other goods of the type) will go up in price with absolutely no possibility of them coming down.
Why these tariffs are even worse in practice:
Trump’s “Liberation Day” featured a poster that he paraded around showing the list of tariffs on our country compared to what our reciprocal tariffs will be. Almost every number on that chart was either ridiculous or a lie. Many of the numbers that were presented as if they were the tariff rates on America from other countries, were actually just national sales taxes. Also, these taxes are often on products of a certain kind like nicotine, tech, etc. Trump then replied with a “reciprocal” tariff to counter this. To summarize, many of the numbers Trump said were the rates other countries put on America were simply miscategorized, and then Trump unveiled nonsensical reciprocal tariffs to these made-up figures.
The official formula from the Trump administration is as follows: exports from the US minus imports to the US divided by 4 times ¼ * total imports to the US. Four times ¼ is obviously one so the entire formula can be summarized as the trade deficit divided by imports to the US. This is ridiculous as trade deficits are entirely normal. A trade deficit is merely a way of determining whether one country buys or sells more to another country. Countries seldom have an equal trade deficit with one another. A trade deficit is not grounds for a tariff because literally every country has a trade deficit with every other country.
These strategies simply don’t work:
This is not the first time that the Republican Party has imposed a sweeping group of tariffs at one time. President Trump himself often praises President Mckinely for his use of tariffs and claims that he is a direct inspiration for Trump’s current tariff plans. Many of his critics have pointed out that these very similar tariffs did not work for President McKinley and had disastrous effects on the Great Depression. The tariffs did raise prices and were so unpopular that it led to the opposing party winning by a landslide in the following election and many local and state elections going to the opposing party. In addition, Bangladesh is currently using trade protectionist tariffs on foreign goods to hold on to its remaining industries. It is not a good sign when the US is emanating the economic strategies of an impoverished nation that is not working. These tariff policies simply don’t work. They didn’t work during the great depression, they don’t work for the people using them right now, and they certainly won't work here.
Trump’s tariffs are already impacting the average worker:
As of Apr 9, it will have been one week since the Liberation Day tariffs were announced and they will take effect on Apr 10. Despite the tariffs not even being put into effect yet, the markets are already reacting. In only the first two days, more than a trillion dollars were lost from the US stock market. The DOW Jones, NASDAQ, and SMP 500 are all down in the range of 5-10%. The stock market had the greatest 2-day steak drop since the early days of the pandemic of 2020. JP Morgan puts the chance of recession at over 40%, which is up significantly from last year. It has been argued that this doesn't matter and is only affecting the wealthy. That couldn’t be further from the truth. The majority of people saving for retirement have at least some money in stocks or index funds, both of which are now tanking due to the overall market reacting negatively. Many consumer products are already going up in price. For example, grocery prices and gas prices are expected to if not already go up across the country. One of the largest foreign companies that makes most of their sales here in the US (Nintendo) has decided to postpone the release of their new console preorder. Both household essentials and recreational products are already going up in price.
Conclusion:
Trump's tariffs are a fundamentally flawed idea that has proven to fail in history, and its effects have already started affecting Americans. This will not bring jobs back to America for years at least due to the infrastructure not being constructed before the tariffs went into effect. The actual tariff rates are far too high and mostly based on made-up figures. The stock market is rebounding (due to mostly unfounded rumors that Trump will rescind his tariffs) but the overall effect will still be down due to all of the previously stated factors. Trump's strategy is flawed on so many levels and it will not work. America is all but doomed to fall into recession unless Americans can pressure Trump to change course on his tariffs.
