If you want to know who is paying for the tariffs that President Trump has imposed on China, Mexico, Canada and others, just pull out your own wallet. Other countries don’t bear the economic brunt of raised tariffs. We, American taxpayers, pay.
Not only do we pay when we buy all the products we import from these countries, but we also pay when prices rise on American-made alternatives, in response to the price increases for imported goods.
Tariffs and international trade are confusing subjects, so let’s go through what we need to know in order to understand what is happening to the economy and whether tariffs are a good idea.
A tariff is a tax on imports — both a source of tax revenue and an indirect means of regulating trade. For example, the U.S. has a 2.5 percent import tariff on foreign passenger cars. So if I purchase a $100,000 imported car, then I, as an American citizen, must pay the $2,500 tax for a total of $102,500.
In other words, by choosing an import, I am shouldering the extra tariff expense, not the country I bought it from.
This doesn’t go only for goods manufactured abroad, either. Tariffs will also prompt U.S. manufacturers who use parts from China or raw materials from Canada to raise their prices on the goods they then sell on to U.S. consumers. And other U.S. manufactures that don’t need tariffed products to produce their goods will still increase their own prices to match their foreign competition. Thus, tariffs make all prices go up.
Anyone who doesn’t take tariffs seriously is gravely mistaken — tariffs are a weapon of economic warfare. They can have enormous consequences.
We put large tariffs on goods we import from other countries, and, in reply, other countries put huge tariffs on products we export to them. All of a sudden, not only are Americans grappling with price hikes at the grocery store and everywhere else, but now many of those same Americans — namely farmers — can’t export their products because retaliatory tariffs make them more expensive for foreign consumers.
You might wonder how much money these tariffs really take out of American pockets. Well, during Trump’s campaign he pledged to impose universal tariffs on all U.S. imports — about $4.2 trillion per year — at a rate between 10 percent and 60 percent. Even the most conservative estimate would establish the price at an extra $9,500 per taxpayer per year.
I don’t think any president could survive such a tax-hike.
It is difficult to get an annual household cost of the tariffs Trump is implementing, since they keep changing. But when he did this in 2019, the tariffs put almost $100 billion in new taxes on imported goods, or about $800 annually per household. The new tariffs promise to be significantly more than that.
Sixty percent of Americans do not have enough savings to handle a $1,000 emergency. Once these tariffs are in place, I can conservatively say that families will easily have to spend an extra $1,500 per year. That’s money most Americans don’t have.
So what should Trump do? Well, we can debate the merits and drawbacks of trade wars until the end of time, but Trump believes in them, and Congress has given him power to impose them, so that’s a pointless exercise.
But instead of the administration downplaying how serious tariffs are, it should call this whole thing exactly what it is — a trade war. If Trump is going to keep escalating, Americans should know what the real downside (and potential upside) is, so they can make their own decision about whether to support it.
Last time Trump began a trade war using tariffs, I pointed out that Americans have incredible resilience and will suffer for greater causes, but first they have to understand what they are going to suffer through and what’s in it for them on the other side.
If Trump is going to continue with tariffs, he should explain all of this and rally the American people behind him. Because if we are in a war, we must be willing to suffer the short term pain together for the long term gain.
Liberty Vittert is a professor of data science at Washington University in St. Louis and the resident on-air statistician for NewsNation, a sister company of The Hill.
