Tariffs, tariffs, tariffs. If you have checked the news, social media, or talked to pretty much anyone, you must have heard about how the Trump administration has implemented the use of tariffs against other countries.
Many questions have arisen from this new wave of economic policy. Don’t worry, The Forest Scout has you covered. In this article, I will break down some of the most frequently asked questions about tariffs.
What even are tariffs, and why are they in the news?
AP Economics teacher Steve Clegg says that tariffs are taxes placed on imported products.
“If the United States puts a tariff on BMWs, for example, that means that if you’re an importer, then you would pay a tax on the importation of BMW’s,” Clegg said.
So why are they in the news now?
Recently, the Trump administration announced a fresh round of tariffs on just about every country in the world. However, shortly after, it announced a 90-day pause on the tariffs. This new wave of tariffs is the largest wave in modern U.S. history, estimated to affect around $1.4 trillion in imports, according to Tax Foundation.
Why is the Trump administration implementing tariffs?
There are a few main reasons why the Trump administration’s recent use of tariffs.
For one, the Trump administration has claimed that tariffs will protect American jobs and industries. Tariffs make foreign goods more expensive, which may push consumers to spend their money on American goods. This allows for the money to stay in America, promoting both employment and industrial growth.
Another reason is to help reduce the trade deficit, specifically with China. A trade deficit occurs when a country imports more goods from one country than it exports. The U.S. imports a lot of goods from China, such as electronics, clothes, and toys, but doesn’t sell as much back to them, causing a deficit.
If Chinese products become more expensive to purchase for the consumers, there would be less of a need to import these Chinese goods, meaning our trade deficit would decrease. The Trump administration believes that these trade deficits cause the U.S. to become too dependent on other countries.
Finally, Trump is using tariffs as a negotiation tactic. He says tougher tariffs on countries such as Canada and Mexico might encourage them to do more to reduce illegal immigration and drug trafficking.
Are there any downsides to tariffs?
Yes, there are a few cons when it comes to tariffs. The major one is the fact that the Trump administration has put tariffs on many goods that we, as a nation, are unable to produce.
“Some products that the administration has placed, like coffee beans or bananas, we don’t even produce in the U.S. — except maybe a little in Hawaii,” Clegg said. If the tariffs do go through, we may see a big jump in the prices of goods that we exclusively import, like coffee and a majority of machinery.
Another con can be seen in the short term effects of these tariffs. As previously mentioned, the Trump administration has implemented these tariffs to promote national industry and infrastructure. The issue with this, however, is that it would take the U.S. years to update the current infrastructure in order to replace the imported goods.
“It takes five to ten years to build factories, supply chains, and infrastructure — you don’t just flip a switch because you put a tariff on Chinese products,” Clegg said.
We can see this in the case of Intel, one of the biggest tech companies in the world, and their $28 billion semiconductor (the material used to make computer chips) plant in Ohio. This plant was originally supposed to start producing semiconductors this year, but it is now delayed until 2030 at the earliest, according to Engineering News-Record.
While tariffs might yield long-term benefits, Americans will likely still feel the effects of higher prices and supply chain challenges due to the amount of time it would take to produce these goods nationally.
How would tariffs affect us, as ‘normal’ Americans?
Tariffs might seem like something that only affects governments and big corporations, but they absolutely affect everyday Americans.
When the U.S. imposes tariffs on other nations, they place a tax on certain imported goods. Businesses who import these goods often foot the tax on the consumers.
This means that when you go to buy things like cars, computers, or even groceries, you may end up paying a higher price due to the tariffs. Tariffs may also have a big impact on business, as well. If a company relies on parts from other countries, their expenses will rise. To offset those costs, they may have to raise prices or even cut jobs .
While the main goal of these tariffs is to protect industry and American jobs, consumers will most definitely feel a pinch in their pockets in the short term. As the debate regarding tariffs continues, it’s important to remember how tariffs work and what they actually mean. They will have a major impact on our economy and could shape the future of manufacturing, consumer prices, and even global trade for the years to come.
