Tariffs probably aren’t something you think about as you go about your day, in fact, you
might have never thought about them at all. That could soon change as Donald Trump gets ready
to return to the White House. In the lead up to one of the country’s most contentious elections
ever, Donald Trump promised voters to implement a series of tariffs soon after taking office. He
tossed out the idea of tariffs of 60 percent on goods imported from China, and 20 percent on
goods imported from just about every other country. Now, U.S. companies are taking action,
hoping to protect their business from what could be a hugely disruptive and punishing policy.
Why? Well, tariffs act as a tax on imported goods. So, if a company imports components from,
say China, they could see the cost of that import rise by 60 percent should Donald Trump follow
through on his promise. What does this mean for consumers? The answer is higher prices and
rising inflation.
While producers might absorb some of the tax, they will also try to pass along the tariff to
consumers in the form of higher prices. In theory, consumers would then buy few imported
products and instead, turn to less expensive domestically made products. The problem though, is
that many of the goods people buy are currently made in other countries, especially China. Even
so-called domestically produced goods are likely to include imported components. The story
doesn’t end there though, those countries that are being targeted might retaliate with tariffs of
their own, hurting U.S. exporters, and U.S. jobs. A global trade war could lead to a global
economic slowdown. This all has companies scrambling to ensure that they don’t get caught up
in what could be a global trade quagmire. Keep in mind that for decades, countries have been
working to dismantle tariffs and other trade barriers. Free trade allows for greater efficiency in
production and facilitated today’s complex supply chains. Now, companies with China-based
supply chains are looking for loopholes that could protect them, while at the same time, trying to
find ways to disengage with China. Small businesses, often seen as the backbone of the U.S.
economy, are likely to be especially hard hit with Trump’s tariff agenda. They lack both the clout
of larger businesses to lobby for exemptions and the capital to make supply chain changes. So,
does this mean you’ll soon be thinking about tariffs? You might if prices start rising and jobs
become more scarce.
Discussion Questions:
- Donald Trump promised voters that he would make tariffs a priority in his new administration.
What is Trump hoping to achieve with his unusually large tariff policy? How are countries likely
to respond? - While the threat of imposing tariffs can appear to be a “tough on trade” policy, in reality, a
strong tariff policy can have negative implications for businesses and consumers. Discuss the
relationship between tariffs, prices, inflation, and jobs in both the short and the long run.
Sources| CNBC: https://www.cnbc.com/2024/11/12/trump-tariffs-companies-scramble-lobbyist-loopholes.html; WSJ: https://www.wsj.com/video/series/news-
explainers/why-economists-hate-donald-trump-tariff-plan/A833400E-2DAB-49D7-867C-4AA9E29B44C7?st=P2hDAD; NY Times: https://www.nytimes.com/2024/11/07/business/economy/trump-tariffs-trade-what-to-know.html; Unsplash: Photo by Nils Huenerfuerst on Unsplash