Who Pays For Tariffs?
1: You do.
While President Trump has painted tariffs as a fix-all method to punish foreign nations and gain leverage against them for American benefit, the only way this can be accomplished is by directly attacking the American consumer.
President Trump has made claims that foreign nations pay the cost for tariffs, but they do not. In truth, it’s the importer who pays for it– in theory, this disincentivizes imports and promotes economic activity within the country.
A business taxed in this way has two realistic courses of action: either bear the cost themselves, cutting into slim profit margins and possibly removing the prospect of profit altogether; or increase prices for consumers to cover the cost. Oftentimes, the business chooses the latter.
Trump has threatened to kick off a trade war with the US’s three largest trading partners: Canada, Mexico, and China. China accounts for 18% of US imports, Canada accounts for 14%, and Mexico accounts for 14% (CIA, 2022). If he actually goes through with it, the effects on consumers would be disastrous. It is impossible for the average citizen to avoid all Canadian, Mexican, or Chinese goods, so an increase in the average American’s cost of living is inevitable.
The US imported $46 billion in agricultural goods from Mexico last year, according to the USDA, and also imported $97 billion in oil and gas from Canada, $87 billion in motor vehicles and $64 billion in vehicle parts from Mexico, almost a third of its steel from Canada and Mexico combined, 99% of its shoes from China, and 30% of its softwood lumber from Canada, among many other goods (Wallace et al. 25). In short, everything will get more expensive for consumers, from Nike shoes to the cost of home repair and energy.
The immediate victim of tariffs is the consumer. Any negative effects on foreign nations are just an addendum.
2: America does.
For a long time, the US has enjoyed a great deal of soft power in global politics – the ability to use diplomatic, economic, or cultural means to indirectly influence other nations. Thanks to undertakings like the Marshall Plan, which gave billions of dollars to reconstruct Europe after World War II and rendered it economically dependent on the United States, America has been a dominant global power for nearly seven decades now. With the fall of the Soviet Union, America lost its sole rival and became the world’s only superpower, causing many Americans to take our relationship with our allies and partners for granted.
Today, America sees a new challenger in China, a rapidly growing superpower that has international ambitions as well. China has begun initiatives like the Belt and Road Initiative, Digital Silk Road, and Health Silk Road, which are intended to support other developing countries, increase Chinese integration into world trade, and expand the Chinese sphere of influence (Kokas et al. 21). China has increased investment on media, education, and tourism, and, in 2019, gave the majority of its foreign aid to African nations (Kokas et al. 21; Eisenman et al. 23). China leads the world in exports, exporting $3.42 trillion in 2023, and is the second largest importer in the world, second only to the United States (OEC 2022).
This should signal to Americans that, if left unchecked, China could overtake the US in soft power and remove many privileges which Americans enjoy. Americans do, in fact, know this: 66% of Americans think Chinese influence around the world is getting stronger, 47% of Americans and 70% of conservatives feel American influence is getting weaker. Instability and a projection of hostility towards our allies shows to the world that the US may not be as reliable of a trading partner as it was in the past.
Seeing this, President Trump has still chosen to attack our allies with tariffs, levying a 25% tariff on Mexico and Canada and threatening the EU with tariffs as well (Shalal et al. 25; Starcevic et al. 25). While China pulls and beckons the world to join its sphere of influence, the US has pushed its allies away. For our allies, the initial decrease in trade with the US may sting, but China would be happy to take American trading partners later on.
America is shooting itself in the foot. By punishing its consumers merely for purchasing goods with a supply chain link in China, Mexico, or Canada, pushing away America’s largest and most reliable trade partners with action and rhetoric, and essentially welcoming China into American allies’ markets by openly displaying hostility, America is doing nothing but making its existence and its citizens’ lives harder.
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