Tariffs haven’t been a major part of U.S. policy since about 1914. Now we have all sorts of them, the latest on stuff we might really care about, like European liquor (single-malt!), wine and food products. This week, I’m here to take your questions on all things tariff!
What is a tariff, anyway?
Thanks, dear East Mountain readers, for the question. Even if it hadn’t really crossed your mind this year.
A tariff is a tax on imported goods. Importers must pay a tax to the federal government when foreign goods earmarked for tariffs enter our country. The cost of the tariff is then applied to the consumers’ cost for the goods.
President Trump announced tariffs on solar panels and washing machines in January, 2018. This was followed later that spring by tariffs on steel, aluminum and a number of Chinese manufactured goods, including flat-screen TVs and other electronics. The Chinese retaliated shortly with their own tariffs on American goods and canceled orders of American soybeans. This week, the administration announced a 25% tariff on European food and beverage products.
So what has this done?
Basically, we, the consumer, have paid this tax, straight into the U.S. Treasury. According to The Wall Street Journal, about $63 billion had been collected through June 2019 (by the way, that would build 10 border walls without having to tap into the defense budget). It hasn’t cost the Chinese much since they are selling to importers at the same price.
What are tariffs supposed to do anyway?
Tariffs are measures taken to protect (and isolate) industry in their home countries. Tariffs enacted by countries for pretty much one of the following reasons:
To protect newly established domestic industries from foreign competition.
To protect aging and inefficient domestic industries from foreign competition.
To protect domestic producers from “dumping” by foreign companies or governments.
What do you think about tariffs, Merritt?
I am SO GLAD YOU ASKED.
They’re a tax on consumers. They are an attempt by governments to meddle in free trade. They’re regressive. In the last 50 years tariffs are most often used by poor countries to either bolster local industry (ineffectively) or ensure state industries control production.
Until 1914 in the U.S., tariffs were the primary funding for the federal government.
And Republicans totally loved them some tariffs in the post-Civil War era. I know this because I tried to say on Facebook that tariffs weren’t a Republican thing and smarty-pants five-time Jeopardy! champion Trey Kelso reminded me that all the robber barons at the turn of the last century were partially propped up by GOP tariffs and protectionism. Do not friend Jeopardy! champions if you want to be right all the time.
The establishment of a national income tax in 1913 quickly replaced tariffs as the primary funding for the federal government. Tariffs for the most part fell out of favor after World War II, but were invoked from time to time until 1980. Under the Reagan and Bush 41 administrations, we abandoned tariffs and protectionist policies, and this continued under Clinton with the bipartisan passage of NAFTA. So for most of us, tariffs have not been part of our trade policy, and definitely not part of GOP trade policy.
I am very anti-tariff. I believe in free trade and free markets. I thought the Republican Party was too. I also recall that Congress has the right to enact taxes… yet this has all been done by executive order.
More importantly, most economists—liberal and conservative—reject tariffs and protectionism as unhelpful, regressive and unsustainable policies. You know, kind of like gross receipts tax in New Mexico.
I’m going to close with this observation. There are two other politicians on the national stage who love tariffs as much as Trump: Elizabeth Warren and Bernie Sanders.
Merritt Hamilton Allen is a former Navy officer, third-place Jeopardy! contestant and PR executive. She lives north of I-40 where she and her family run two head of dog, and one of cat.