What If Tariffs Are Terrific?
There’s a lot of buzz in the news these days about President Trump’s threats to impose tariffs on steel and aluminum imports.
Russia and China are also in the president’s cross hairs for more tariffs on other products.
Current US Tariffs On Foreign Goods
Currently the US protects at least four industries with tariffs. Those industries are: Paper Clips, Tuna, Tobacco, and Sneakers.
It would be hard to imagine where we’d be without the paper clip tariff. Offices around the US would be in turmoil and bottom lines would turn from black to red.
Your tax dollars at work protecting American paper clip producers.
What Happens If Tariffs Do Go Into Effect?
The principle argument seems to be that there are fewer steel and aluminum workers than there are users of the steel and aluminum raw materials produced.
Cars, aircraft, washing machines, toasters, etc. are all loaded with steel and aluminum.
On the surface it would seem that these dependent industries are going to have to pay more for their steel and aluminum produced in the US than imported from Canada – currently our largest steel and aluminum provider.
Can America handle .003 cents added to the price of a can of soft drink? Good thing we got the tax break bill passed.
Will glass Coke bottles make a comeback?
Who’ll Blink First?
Anytime a tariff is put in place there is pain for some and prosperity for others. The steel and aluminum workers will do fine while there may be layoffs elsewhere.
A new steel mill in Granite City, Illinois is being brought back online to help supply the need for American Steel. It will provide 500 or more new jobs.
So, if there is pain, who will feel the pain the most? As mentioned above most of our steel and aluminum currently comes from Canada – our second largest trading partner.
Will Canada accept the tariff, or will the president give them an exemption waiver? Or if not, will Canada retaliate with agriculture tariffs on us or target some other industry that might increase our pain.
America is the leading economic power in the world. Our bonds are a sure thing investment for every other country on earth. They need us way more than we need them.
I believe that if there is an attempt to make a more level trade playing field by the president that America can hold out against any retaliation longer than other countries can.
Some Final Thoughts
Before the Federal Income Tax all America’s bills were paid by tariffs and fees. We charged countries for access to our citizens (customers) and to keep others from undercutting prices to compete against American businesses.
If your targeted country has enough customers then it’s worth it to bite your tongue, pay the tariff, and sell your goods.
India had enough people for Harley-Davidson to pay a 100 percent tariff to get their motorcycles into that particular market. The tariff has since been reduced to 50 percent.
We only have a 2 percent duty fee for almost 75 percent of foreign goods entering this country. Some other types of goods are charged by weight.
Two percent is hardly a protection for American workers.
In 2002 President Bush imposed similar tariffs. Those lasted 18 months before being rescinded.
Will tariffs work this time around? Are tariffs the tool need to force other countries to pay their “fair share?”
Has the time finally come for fair trade rather than free trade? Only time will tell. What say you? Comments below