Tariffs in 2025. Here We Go Again.

 

I thought that I should have another go at this.

During Mr Trump’s first term I wrote regarding his comments on tariffs and that the things he said were incorrect. Lies actually.

With Mr Trump again assuming the office of the Presidency he is calling for import tariffs from 10% to 60%, depending on the country of origin. Just so that we’re clear, TARIFFS ARE A SALES TAX WHICH IS ULTIMATELY PAID BY CONSUMERS.

In case just pointing that out is insufficient, perhaps walking you through the steps will make the point easier to see:

Suppose that a manufacturer (say, Chinese) makes an item and needs to sell it for $10 in order to keep his factory open. Before tariffs he arrives at the border and sells it to an importer for the $10 that he needs and goes away. The importer adds his standard 100% mark up and sells it to a retailer for $20. The retailer adds his standard 100% mark up and sells it to the final consumer (you) for $40.

Now let’s take a second look.

Suppose that same manufacturer (still Chinese) makes that same item and needs to sell it for $10 in order to keep his factory open. After tariffs, he arrives at the border with the intention of sailing away with $10. He’s told that there is a 60% import Tariff. What happens now? The manufacturer isn’t going to drop his price. He needs that $10. Ten dollars is a fair price and cheaper than the same thing can be made in America.

It is going to cost $16 to get this item across the border and that’s what the importer will pay if he still wants it. At this point it doesn’t really matter whether the extra $6 Tax is paid to the manufacturer who then pays it to the Government or whether it’s paid directly by the importer to the Government. Either way, $16 comes out of the importer’s pocket. That’s $10 for the manufacturer (who could sell the item to another country if you don’t want it.) and $6 Tax for the Government. The importer adds his standard 100% mark up to the $16 he paid and sells it to a retailer for $32. The retailer adds his standard 100% mark up and sells it to the final consumer (you) for $64.

The end result of a 60% tariff is that the final customer (you) have to pay 60% more for that imported (Chinese) item. Something that had cost $40 last week costs $64 this week.

Now let’s look at who this affects.

A few years ago it was true that WalMart was China’s 5^th largest customer. WalMart bought and imported more Chinese goods than all except 4 countries. And one of those countries is the USA, which has other companies that also import Chinese goods. Other companies like Dollar General, Costco, Target and Amazon.

So what sorts of people shop at places like WalMart & Dollar General? Folks like Donald Trump? Steve Bannon? Linda McMahon? Elon Musk? Steve Mnuchin? Mark Zuckerberg?

Billionaires all.

How about any other members of Mr Trump’s cabinet & inner circle?

I don’t think you’ll see any of them pushing a cart through the aisles of your local Target store.

No. The folks who will be hit hardest by this Tariff (sales Tax) will be the people who can least afford to pay. The folks who need to shop at discount stores in order to scrape by. The ones who will never be able to afford to buy a home.

I don’t want to talk anybody down (particularly because I fall into the demographic most likely to have voted for Mr Trump) but, statistically speaking, people with lower levels of education are more likely to be poor (and hence shop at discount stores) while people with higher levels of education are more likely to be wealthy. You can easily find a video on-line of Mr Trump smiling and saying “I love the poorly educated” while at the same time asking for their votes.

So why does he want to increase the taxes on the people that he “loves” and who voted for him, while in his last term he gave tax breaks to non-Costco-shopping billionaires?

The guy went to business school. He knows how this works. So why does he lie about who ultimately pays the bill for his highest tariffs?

I just thought I’d ask.

What do you think is the answer?