What is a Tariff?

If you’re a Trump Voter, the Answer may Surprise you.

What Trump Supporters think tariffs are

For nearly a decade now, Donald Trump has been promoting tariffs as a tool of choice for solving America’s economic woes, at one point calling them “the greatest thing ever invented.” He has made them a central point of his economic policies for his whole political career. Indeed, his vice president-elect, JD Vance, has called them “the heart of the Trump Economic Plan.”
It is, of course, well known that Trump’s supporters view him even as something of a savior figure, holding him in the highest imaginable regard. They hang on his every word, you might say. As such, one would think a typical Trump supporter, having listened to his political diatribes for the better part of a decade now, would know all about tariffs, what they are, how they work, and who pays them.

I decided to test this hypothesis on some of the Trump supporters in my life. I simply asked, ” What’s a tariff?” Unsurprisingly, none of them had even the slightest idea how tariffs work. To reiterate, everyday Trump supporters, broadly speaking, do not know what tariffs are. Certainly, the professional Trump apologists in the right-wing media know what they are, but they have completely confused and misled their audiences to the point of incoherence on this topic.

The people I’ve talked to were convinced that tariffs were fees paid by foreign countries, specifically China, as if the US government could freely tax foreign states. They also believed China’s government would respond by sending jobs to the US to avoid the tariffs. They spoke as though this all took place between the governments of the two countries and no actual third-party business would be involved, as if the US just passes China a bill, China pays it, which is the end of the story. They also believed all this would somehow make the cost of the things we buy cheaper.

Trump has fed his supporters this simplistic, naive view all these years, and it seems few chose to double-check it with even a Google search. Feel free to try this on Trump supporters in your life, and do make hay of how monumentally uninformed they show themselves to be.

What tariffs actually are

Tariffs are taxes paid on imports. In the US, these are paid specifically by the Americans who receive the imports. This includes both ordinary people and businesses. Businesses faced with tariffs most often have to pay the cost themselves (and suffer from a lower rate of profit) or pass the cost on to their customers in the form of higher prices. In other words, tariffs are the exact opposite of what Trump claims they are.

Tariffs get passed on to the customers

The US government cannot just impose taxes on foreign countries or foreign businesses therein, so Americans are the ones who end up paying. Even if the US government could send China a bill, the Chinese government would pass the cost on to the exporting companies, who would pass it on to the importing businesses in the US, who would then pass it on to you, the American customers in the form of higher prices.

Donald Trump is proposing a 60% tariff on all goods from China and a 10% to 20% tariff on goods from elsewhere. Most of this will inevitably be passed on to consumers. I suggest readers take a look at where some of the items they commonly buy come from and ask, would a 10% to 60% price increase on imports be helpful to their family’s budget?

Government policy cannot control who ultimately ends up paying the cost of a tariff. The cost gets passed on to whoever has the least bargaining power, whoever is most desperate to complete the deal. While it may be possible to negotiate for a lower price from the exporter to make up for the tariff, the US importer will more likely be in desperate need of the imported item and more than willing to bear the costs. If the importer’s US customers do not have a strong need for the product offer, the importer will be stuck with the cost. If the customers badly need the imported item, the cost of the tariff will likely fall on them. This is to say, if the product is important to your quality of life or ability to keep on living, you will get stuck with every cent of that tariff.

Tariffs and jobs: making things more expensive

The only way tariffs can bring jobs back to the US, as Trump promises, is by making imported products so expensive that already-expensive American-made goods are affordable by comparison. Prices must go up for it to be worthwhile for companies to pay American workers to make a product in the US that would otherwise be imported. Since US workers tend to be paid more than workers from the developing world, the resulting products will be proportionally more expensive than the original imports would have been.

We saw this happen in 2018 when the Trump administration imposed 20 to 50 percent tariffs on washing machines. The Wall Street Journal notes these led to increases in the price of both imported washers and American-made ones, as domestic producers realized they too, could up their prices. Dryers went up as well, as these tend to be purchased alongside washers. While the tariffs did encourage companies to build washing machines in the US, thus creating jobs in that industry, the Journal estimates it costs 1.5 billion more annually at higher prices. This breaks down to $815,000 per job. This means customers are paying hundreds of thousands for small numbers of jobs that pay tens of thousands, and on net, losing jobs rather than gaining them.

This may be all well and good for the small percentage of people who make washers and dryers but it hurts the rest of us. On net, making anything more expensive hurts the economy as Americans have less money to spend on all other goods and services, leading to fewer jobs in total. The Tax Foundation found Trump’s tariffs and Biden’s continuation thereof to be “one of the largest tax increases in decades” and on net, costing the US 142,000 jobs. They estimate Trump’s proposed tariffs for his second term could cost the US 684,000 full-time jobs. Likewise, The Peterson Foundation estimates Trump’s proposed tariffs would cost a typical household an additional $2,600 per year, up from their estimate of Trump’s previous round of tariffs, whose yearly cost is $1,700 per household.

Retaliatory Tariffs

Then there is the likelihood that tariffs, as aggressive as the ones Trump proposes, will be met with retaliatory tariffs on American goods imposed by other countries worldwide on their own people. This will undermine American business, further destabilize the economy, and lead to conflict abroad.

For example, the tariffs from Trump’s previous administration were met with retaliatory tariffs, which led sales from American farmers to China to fall by over $10 billion (from $19.5 billion to $9 billion) between 2017 and 2019. This led to a 20% increase in farm bankruptcies and a $16 billion bailout to the farm industry in 2019, up from the previous year’s $12 billion, for a total of $28 billion over the course of two years.

Conclusion

Economics is a field divided into numerous contending schools of thought that disagree with each other on pretty much everything, with the curious exception of tariffs. From center to left to right, the profession is in near-universal opposition to tariffs because they hurt the economy through higher prices, lower growth, misallocating workers to jobs that could be better done elsewhere, and a general tendency to do more harm than good.

Amazingly, this has not gotten out to Trump supporters, who he has misled to believe the opposite. I’ll say it again, Trump supporters generally do not know what tariffs are. While the many lies and misrepresentations of Trump have been talked about for years, this one has been strangely overlooked, as it is one that can be easily demonstrated on a Trump supporter near you. It is, of course, a reminder that Trumpism is itself a big, intrusive, authoritarian government driven by economic illiteracy and insular leader worship, as authoritarian movements tend to be.