For young people or those who don’t care to pay much attention to politics, the issues discussed on the news can be bewildering. Who can blame them for turning the channel? But as patriotic Americans it’s important to have some understand of issues that impact our lives. One of those issues today are tariffs. Written with my teen grandsons in mind, this is my very simple explanation of how tariffs affect every American.
Politicians use words so that things don’t sound so bad. Trump said he is “imposing tariffs on China.”
“So what? That’s China’s problem. It doesn’t affect me, right?”
Wait just a minute…
Tariffs imposed by the U.S. on the products of another country are not paid by the other country. A tariff on Canadian lumber is not paid by Canada. A tariff on Chinese steel is not paid by China. When a tariff is added to a product, that tariff, or tax, is paid by the American consumer every time he purchases that product.
Say, for example, Trump adds a tariff to red rubber balls made in China. Red rubber balls used to cost $4 at the Dollar Store. But after the tariff is added, the red rubber balls cost $5 each. China still earns the same profit for each ball that is sold. The extra dollar goes to the U.S. government. China is hurt by the tariff because American consumers think the Chinese balls are now too expensive and they don’t buy as many. China doesn’t sell as many red balls and they make less profits.
American manufacturers who make red rubber balls are helped by the tariff added to Chinese made red rubber balls. Now that the Chinese balls cost $5, American made red balls that have always cost $4.25 are the cheapest balls in the store. American consumers will buy the American red balls instead.
American manufacturers are helped in another way too. Now that Chinese red rubber balls cost $5, American manufacturers can raise the price of American made balls from $4.25 to $4.75. Consumers will buy the American made ball, even at a higher price, because it’s still the cheapest ball in the store. The American manufacturer wins two ways. He now sells more red rubber balls and he sells them at a higher price.
But what happens when China gets mad and retaliates by adding their own tariffs to our American exports? Maybe one of the goods being targeted by China are American made green rubber balls that are sold at the Chinese Wal-Mart. Green rubber balls used to cost the equivalent of $4 but now they cost the equivalent of $5. Chinese consumers stop buying the green rubber balls made in America because they think they are too expensive. They buy cheaper green balls made in France instead. The American manufacturer sells fewer green rubber balls to China which hurts his profits.
If the U.S. places tariffs on our trading partners and those partners place tariffs on us, we run the risk of getting into a trade war with both sides adding tariffs onto more and more products. Consumers will pay more for all of those products and more. If there is a tariff on aluminum, the soft drink manufacturer raises the price of soda pop to cover his increased cost of the can. A tariff on lumber means you will pay more the next time you buy a 2 x 4 at Home Depot or even an appliance that is shipped on a wooden pallet. Over a month or a year or several years, if a trade war continues, it will add up to a pretty big chunk of change that comes straight out of YOUR pocket.
Who wins in a trade war? The American manufacturers who can now sell more products to American consumers at higher prices. They make bigger profits, hire more workers and can pay them a higher, living wage.
Who loses? That same or other American manufacturers or farmers who depend on exports for their livelihood. Retaliatory tariffs cause them to lose their foreign market. They lay off workers and may even close their businesses. Some companies may move production overseas to avoid the tariff. In either case, American jobs are lost.
Who is the biggest loser? The American consumer who pays more for both American made and foreign made products.
But is it really a bad thing if the American consumer has to pay more for the products he buys?
Politicians like to blame China and other foreign countries for “dumping cheap products on our shores.” But countries can’t sell us what Americans won’t buy. It isn’t China who has driven American manufacturers out of business. The decline of American manufacturing was caused in part by the purchasing decisions made by our very own American consumers.
The American consumer has become addicted to inexpensive Chinese made goods. The rise of a Wal-Mart in every city and mid-sized town, and a Dollar Store on every corner, is an indication of that. Americans don’t care if the products they buy are made with inferior materials or are produced using foreign slave labor. Americans want lots of stuff and they want it cheap!
If America wants to have a strong manufacturing sector, Americans need to be willing to pay a higher price for American made products that will allow workers to earn a living wage and still make a profit for the company. Despite patriotic rhetoric to “buy American,” American consumers have proven time and again, that they are not willing to do that. Their addiction to cheap foreign made goods has damaged American manufacturing.
That is why Donald Trump believes we need tariffs. He believes that the only way to prevent the American consumer from buying China’s cheap merchandise is to raise the price of it. Consumers will then buy the more competitively priced American made products. He believes that it will improve the bottom line of American manufacturers and create new American jobs.
The one thing Republicans and Democrats agree on is that our trade policies have, for years, been unfair to the American worker. You may or may not agree with Trumps solution. That’s your decision to make. But the world has moved on. We are now living in a global economy. Going backward isn’t an option for most Americans.
Whatever your viewpoint, as a patriotic American, you have both a right and an obligation to vote. Your fellow Americans count on your vote to help improve communities and set our country on the path the majority of Americans want it to take. Your vote counts. Don’t be a slacker. Register to vote today at https://www.usa.gov/register-to-vote