Hello I am crawling out of the woodwork again to explain an American political thing in too much detail.
So. Basics. What is a tariff? In short itās a tax that people pay when they import things.
In long, imagine you want a thing. Say, a really nice baseball bat. You want to buy it from a company that makes them in, letās say, Japan. Youād likely buy them from a store in the US that bought that baseball bat from the Japanese manufacturer.
Letās say for simplicityās sake that the store bought it for $50 and they charge you $100 for it. This margin is enough for the baseball supply store to pay their employees, pay their rent, buy more stock, buy some advertising, etc.
Now imagine the government decides that Americans arenāt buying enough baseball bats locally. Or perhaps they have some sort of issue with Japanese baseball. I dunno. For whatever reason though they put a 20% import tax, known as a tariff, on Japanese baseball products.
Now that store in the US in addition to paying $50 to the manufacturer in Japan is also paying $10 in tax to the US government. That baseball bat now essentially costs them $60. And since they need more money to buy stock now and they needed that markup to run their business anyways your $100 Japanese baseball bat will now cost you $120.
In an ideal world (if you like tariffs) this would cause only the targeted product to cost more while locally manufactured goods cost the same. So maybe youād be encouraged to buy an American made baseball bat because those still only cost $100 while imported ones now cost $20 more.
In the past and in our modern day Congress, and in some circumstances where Congress has allowed it, the president have put tariffs on specific products do discourage people from importing them or buying them. For example, during the Biden administration they determined that Chinese electric cars, with their incredibly cheap cost, could become a real threat to the American automotive industry so a 100% tariff was put on Chinese made electric vehicles which made them way more expensive. This tariff has worked. People donāt really import Chinese electric vehicles and generally buy American or European ones instead.
So in short again, itās a tax that a business pays on imported goods to discourage people from buying those goods because the business will be forced to charge their customers more to buy it in order to cover their own costs.
So whatās going on with tariffs right now?
Well, most people donāt know what tariffs are exactly. A lot of people are also rightfully pissed that the US doesnāt have a lot of good jobs right now. I mean thereās jobs, but not very good ones. Not ones thatāll give you a nice quality of life and a comfortable retirement.
During the time when there were a lot of jobs like this in the 40s-60s, the US was a manufacturing hub. After the labor movement, working in a factory could give you a stable working class job with benefits. It might not have been a high paying job, but it was enough for a family to live on one income in a small house or apartment and to have healthcare and an okay retirement.
After the 1970s however, manufacturing started moving overseas to countries where the cost of living is lower and/or they have less workers rights like in China or Vietnam. Right after this was also the era of Reagan. Deregulation of banks and the media, cutting government services, anti-union activism. This set the stage for the 2008 recession and the current economy we have now in the US where more people are contractors, thereās less unions, more service jobs, and in many cases itās nearly impossible to have a decent living and retirement on one income.
Many people in the US, especially in areas where manufacturing used to be huge, have a cultural memory of when life was better but instead of contributing this to government policy and corporate anti-union efforts, they contribute this to the loss of manufacturing jobs.
In fact, unemployment is fairly low right now. The problem is that jobs that are available donāt pay people enough or arenāt full time. Iām technically not unemployed for example because I occasionally get contracted by disabled relatives to do chores and errands for them through a state agency that provides those services but I still make less than $400 a month doing that. I donāt need to tell you that thatās not enough to pay rent and a lot of people in this country are in similar situations.
A lot of people donāt know all that though. They think that the problem is manufacturing leaving the US for foreign countries they donāt know much about and might not have a very good opinion of.
So, enter Donald Trump. Again.
What Donald Trump has been doing is blaming other countries for our economic problems. He points out that the US imports more than it exports. Which is true, but thatās not necessarily a bad thing. We donāt have every natural resource in the world. Our climate means we canāt grow certain things. Our manufacturing capacity is lower than it used to be. We produce oil but not every part of the country is in a convenient spot to get that oil to so in some regions it makes more sense to import it by sea. Also, international trade isnāt supposed to be a 1:1 exchange. Itās business. Itās an ecosystem. Not some sort of debt based system.
However, again, most people donāt know all that. So some of them hear Donald Trump say that these countries owe us for having a trade deficit. They stole our manufacturing jobs. The kind of jobs we had when living was easier. If we could bring manufacturing back to the US we could be prosperous again.
He also calls tariffs ātaxing the other countriesā which is justā¦ a lie. Thatās not what tariffs are. Tariffs are a tax on local businesses importing things, not foreign businesses making those things. Again though, most people donāt know this.
So the general idea with his tariffs is to bring manufacturing back to the US. Which isnāt going to happen.
Hereās the thing. Letās return to that baseball bat. Okay, your imported baseball bat from Japan is $120 now. Will that American made baseball bat actually be cheaper? No, actually. Because we live in a globalized economy. That baseball bat factory in the US buys its wood from Canada. It buys its beeswax wood polish from a manufacturer in the UK. It buys the stamps for its logo from a factory in Vietnam and the paint used on that stamp was made in Germany. The machines themselves that they use to shape their baseball bats have parts that were made in several countries from materials imported from other countries. The manufacturer has to pay a tariff on all of those things. So, your American baseball bat also ends up costing $120.
Not to mention that we simply donāt have the manufacturing capacity that we used to and it takes years to set up the supply chains and build the facilities necessary to build things at scale.
And even with tariffs in place, itās still cheaper to manufacture a lot of things overseas because of the low cost of living in those countries. So those jobs just arenāt coming back. Also, a lot of those jobs that used to exist have been automated. A massive large scale brewery and canning facility for example no longer requires you to have people to manually stir the vats and count things and stamp labels. You might only need three guys monitoring data on screens and a manager to run an entire factory these days because of automation.
So, Trump has started putting tariffs in place hoping itāll bring back manufacturing (it wonāt) and itās bringing up prices which he also said heād bring down.
Hereās the other thing though. Some manufacturing and resource mining could potentially come back to the US. Not most, but some. If these tariffs were a sure thing it would still ruin us for no reason but people could adjust to the new terrible normal over time and some investors could bring back some manufacturing and resource processing and over time a few things would get a bit less expensive.
However, these tariffs have proved to be WILDLY unpopular once people actually realized what they were. Especially since he decided to tariff Canada and Mexico whichā¦ makes no goddamn sense. Theyāre our neighbors, a couple of our closest friends, the countries we trade with the most, where we get a lot of our food and natural resources, and thereās a trade deal that Trump himself negotiated in his last term that says there canāt be tariffs between our three countries.
So he keeps taking them away, putting them back, putting them on pause, putting them back. Saying theyāll be 10%, saying theyāll be 20%, putting a 125% tariff on China, lowering it, raising it again. Nobody knows what the fuck is going on so why would investors put all that time and money in to setting up factories and processing plants in the US if they donāt know what tariffs might or might not be in place tomorrow?
Also. The president legally canāt do that. Congress hasnāt officially given him the authority to do that. In fact, theyāve already blocked him from putting tariffs on Canada and various people are taking him to court over it.
Also also, most economists agree that tariffs are generally a bad thing and they usually donāt work anyways unless theyāre specific and targeted like the Chinese electric car thing I mentioned earlier.
So tariffs donāt bring back manufacturing jobs, they bring prices up, the way theyāre being implemented is really unstable in a way that makes them hard to recover from, and Trump legally canāt be doing that anyways.
So in short, your coffee and baseball bats and everything else is gonna be more expensive if they end up sticking around or maybe not if they donāt go into effect but either way this has done some mega damage to the economy.
As an historian and having had to study economics, this is a pretty great explanation.
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