Donald Trump is at it again, lying to the American people. Trump is trying to make you believe that a tariff is a good thing because the money ends up at America’s treasury. It sounds good when you look at it that way. It sounds even better when you believe that a tariff is paid for by the company exporting the goods to America.
But that is not how tariffs work. A tariff is a tax. When was the last time you saw a company pay a tariff without raising prices? Never.
Here’s how tariffs works.
America added a 25% tariff on over 5,000 Chinese products.
That means that something that costs $5.00 will now cost $6.25 to sell in America. If you, for example, bought a box of cereal for $6.50 prior to the trade war, that same box of cereal would now cost you $7.80. You would be paying $1.30 more for that box of cereal. (assumes a markup of 30%)
That is because the cereal manufacturer isn’t going to pay the $1.25 out of their pocket, but rather they will be raising their cost by 25% to cover the new tariff.
As you can see, you pay for the tariff out of your pocket.
But if the American treasury gets the 25% tariff doesn’t that mean that America has more money?
Yes, it does. But when was the last time you saw America write you a check?
That windfall to the American coffers that Donald Trump is touting is being paid by you.
Congratulations, Trump just raised your taxes.
Some readers may be tempted to smugly believe that it doesn’t affect them because they don’t buy Chinese products.
They would be wrong.
The Trump tariff on Chinese imports covers over 5,000 items.
These include breads, dairy, candies, cereals, eggs, fish, fruits, meats, cooking oil, sugars and vegetables just from the grocery stores. Included are also office equipment, paper, wood, chemicals, furniture and many other products.
So, unless you don’t shop at the grocery stores, you are paying Trump’s 25% taxes.
But it gets worse. It is called a trade war for a reason.
China has now retaliated with its own list of tariffs on American goods. They mostly target America’s largest industry, the agribusiness. Agricultural workers and farmers are hurting because of the tariffs, so much so that the U.S. government is subsidizing them.
Guess where that subsidy comes from?
That would be your taxes, so as unallocated monies are diverted to help the farmers, other tax-funded projects like roads lose money. Eventually, the U.S government is going to have to raise monies to pay for those things.
Guess which wallet that will come from? Yours.
America will have to raise taxes to pay for the subsidies that farmers get from Trump.
But it gets worse, the subsidies aren’t enough, so the farmers aren’t hiring people to work the fields.
Not only will you be paying more in taxes, but many of your fellow Americans won’t have enough to feed their families with.
That’s what tariffs are.