On Wednesday evening, President Trump announced a series of tariffs that will be placed on imports from over 180 countries. While Trump has claimed that this will make America wealthy, the effects of the tariffs say otherwise. The tariffs will be reaching far into the pockets of working class Americans. Let’s take a look at a few of the coming consequences, leading to increased prices on all goods, both foreign and domestic.
HOW TARIFFS INCREASE THE PRICES OF ALL GOODS
While it may seem at first that the tariffs will be imposed on foreign companies, the price of the tariff quickly passes down to the consumer. We’ll follow the ladder down from point of import to point of purchase by the consumer
- Manufacturers (think automakers, tech producers, etc), wholesale companies, or big retailers (think Target, Walmart, etc.) import materials to produce or import goods from abroad. Increased tariffs mean manufacturers and retailers must now pay an additional “tax” on all items coming in from abroad.
- In order to protect their profit margins after paying increased prices on imported goods and materials, the business passes off the cost to the next buyer, this increases prices of products. Manufacturers pass off the cost to the distributor and the distributor to the retail stores, and retailers to consumer.
- Example: Big Retailer purchases televisions from supplier country for $100. Tariffs now impose a 30% cost increase on TVs from supplier country, raising the cost to $130. Big Retailer, looking to protect their profits, now sells the TVs for 30% more, which the consumer ultimately buys for $130 instead of $100.
Increased tariffs don’t just impact imported goods and materials either. Domestic retailers will also inevitably join in on the increased prices. If foreign TVs now cost $130, domestic producers will be inclined to join in and sell theirs for $120, taking advantage of the inflated market to increase profit margins, which has historically been the case.
Such wide sweeping tariffs on almost every nation, virtually every product will be affected, as they are either constructed with materials from these countries, or are assembled in these countries. You will be hard pressed to find a product whose materials were mined, assembled, and sold entirely with the U.S., subjecting almost all goods to increased prices.
Even if the expressed intent is to increase American manufacturing, almost every manufacturer relies on imported raw materials. We rely on foreign lithium, iron, cobalt, bauxite, rubber, etc. Not only would the U.S. now have to ramp up manufacturing immediately, but it would also have to ramp up production of every raw material on earth. Unless the U.S. can completely source all materials and manufacture all goods within the nation, the working class will be subjected to ever increasing prices on nearly every product on the market and worsening inflation.
Zinnia 