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Law and Politics

Tariffs: Explained

Do tariffs help or hurt the U.S. economy?

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 WHAT IT IS

  • A tariff is a tax on an imported good. [Merriam-Webster]

  • An import is a product brought into a country to be sold. [Merriam-Webster

  • In order to sell the good in the country, the tariff or tax is paid by either (1) the company receiving the good, or (2) the consumer. [Reuters]

  • U.S. Customs and Border Patrol (CBP) collects the tariff within 10 days of the product clearing customs. [Reuters]

  • Most economists find the producer makes the consumer pay the tariff by raising the price of the goods. [Reuters], [NPR]

  • Because tariffs are taxes on goods from other countries, they could encourage consumers to purchase similar items or products that are made in the United States. [BBC News]

  • Countries often retaliate against tariffs by placing tariffs on U.S. producers trying to conduct trade. This results in a "trade war." [Council on Foreign Relations]

WHY IT MATTERS

CIVICS: Under the U.S. Constitution, only Congress has the power “to regulate commerce with foreign nations, and among the several states...”  [The Council on Foreign Relations] The president have approval from Congress to impose tariff. 

 

SOCIAL: Short term gains of protecting home-based industries do not exist in a global economy. When countries retaliate with tariffs on U.S. goods, local companies that do trade internationally suffer as their products are not purchased by previous consumers. [The Council on Foreign Relations

PRO

The tariff could help increase employment

tariffs help provide the government with revenue. Some argue this money could result in the government investing in job opportunities for U.S. workers. [PBS News Hour]

 

 

Tariffs could boost U.S. industries

Some government officials suggest tariffs can help a country end a trade deficit. Changing trade agreements to include tariffs could allow U.S. producers to increase prices, helping the local economy. [USA Today]

 

 

If certain products are taxed before entering the U.S., sellers of those products could benefit by capitalizing on increasing prices. [The Washington Post]

CON

The tariff could hurt global industries and companies by:

  • Reducing current international clients, no longer wanting to buy the more expensive U.S. product,

  • Reducing potential customers for the U.S. company,

  • The company must cut prices of goods to compete,

  • The country finds a new trading partner,

  • The country creates a similar product that becomes a rival competitor. 

[Forbes], [The Council on Foreign Affairs]

 

 

tariffs could turn consumers away

When tariffs are enforced, some prices could increase, preventing consumers from purchasing specialized products. [The Washington Post]

 

Employees tasked with making business decisions at certain levels could be impacted by tariffs. They can affect a company’s hiring decisions. [PBS News Hour]

 

Tariffs tend to decrease competition, which some experts say isn’t good for the U.S. economy. [USA Today]

WHERE WE ARE NOW

  • 2019 U.S.-China Trade War: President Donald Trump increased tariff on Chinese goods, resulting in China’s Xi Jinping raising tariffs on U.S. products. [Bloomberg]

  • Agriculture (farming), manufacturing, and automakers reported losses and instability caused by the trade war. [Forbes], [Buisness Insider] Economists estimated U.S. households are paying $800 due to the U.S.-China trade war. [PBS News Hour]

  • July 2019: The Trump administration has returned to revisiting its tariff and trade agreements. [USA Today

  • Jan. 2020: U.S. and China signed Phase 1 of a trade deal. Tariffs have yet to be removed by either country. [The Wall Street Journal

  • Apr. 2020: Amidst the COVID-19 crisis, a study found the Trump administration's tariffs have increased the price of medical equipment and PPE. [The Los Angeles Times]

  • June 2020: China halts buying many farming goods, including soy and pork, from the U.S. [Bloomberg]

  • Sept. 2020: The World Trade Organization ruled that some of the U.S. trade deal with China is illegal under global trade rules. [World Trade Organization]

THINGS TO THINK ABOUT

  • President Trump's current trade policies are against the World Trade Organization foundational rule, that tariff must be applied globally and not unilaterally. [Reuters]

  • Engage with this interactive article from The New York Times on the Trade War's evolution.
  • How does political rhetoric play into the public story of trade and tariffs?
  • Has the president violated the Consitution by not securing Congressional approval of tariffs?
  • What are the long term effects of tariffs on U.S. strength?
Key Vocabulary