Tariffs

We'll All Be Paying Trump's Hidden Tax

Tariffs hurt American consumers.

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Imagine China/Newscom

A while back Lawrence Summers, an economic adviser to the past two Democratic presidents, joked that President Trump's trade policies toward China and other nations amounted to: "Stop, or I'll shoot myself in the foot." Which is funny, but wrong. They actually amount to: "Stop, or I'll shoot the American public in the foot."

The tariffs Trump has imposed don't hurt foreign producers anywhere near as much as they hurt American consumers. After all: A tariff is simply a sales tax on imported goods. Guess who pays sales taxes?

Even worse, those taxes are often hidden. More than half of the imports to the U.S. are manufacturing components or raw materials, used by U.S. companies to make other products. So the 25 percent tariffs Trump has slapped on steel from China and a few other countries raise the cost of making things with steel in America.

Pennsylvania-based CP Industries, for instance, makes large cylinders to hold gases for the Navy and other customers. Earlier this month, it had to pay a $178,000 tariff for a shipment of steel tubes—"equivalent to about two weeks' payroll," The New York Times reported. At those rates Michael Larsen, the head of the company, wonders: "How long can we last?"

Hence the steel tariffs might protect some American jobs in the steel industry, but it will destroy others. That is the conclusion not only of free-market advocates such as the Cato Institute, but also fair-trade groups such as the Coalition for a Prosperous America. The Coalition concedes that while "the 19,000 jobs gained in the steel and aluminum sectors" would mostly offset job losses elsewhere (such as the 10,000 jobs destroyed in construction) the total effect would be a net job loss of more than 400.

That is the historical norm: For decades, protectionism has hurt the American consumer without much helping the American producer. The cost of each job saved by protectionist measures in the 1980s and 1990s, for instance, was almost $620,000 (in 2017 dollars).

The higher steel prices will inflict costs that often will not be seen directly. Here in Richmond, Virginia, the bill to erect a new state office building near the Capitol already has risen by $24 million, largely because politically imposed delays led to the use of more expensive construction materials. Higher steel prices will drive costs up further.

That single case won't make a big dent on the typical Virginia resident's tax bill, granted. But multiply the example by every newly built structure that uses steel girders, and the hidden economic effects soon pile up.

Meanwhile, the typical Virginia resident will pay higher prices for home appliances. In January, the administration imposed a 50 percent tariff on imported washing machines (and washing-machine parts) and a 30 percent tax on solar panels.

About 2,400 Americans work making washers and dryers in the U.S. According to one recent economic analysis, the net annual cost to consumers from the Trump tariffs comes to $1.4 billion—meaning Americans will spend $583,000 per year for every job saved.

That is, assuming the tariffs actually save jobs. They might do so in the washer industry, but they almost certainly will not save jobs overall. The $1.4 billion that would have been allocated to more productive uses will now go to meet the washing-machine tax. 'Twas a famous victory.

Another example that hits even closer to home: In response to a complaint by one paper plant owned by one hedge fund, the Trump administration has imposed steep tariffs on Canadian newsprint. The effect has been almost immediate. The Tampa Bay Times recently "announced that it would cut about 50 jobs after new tariffs imposed by the Trump administration dramatically increased the cost of newsprint," reported The Hill a few days ago. "A spokeswoman for the Times confirmed the layoffs … saying they are directly in response to the tariffs imposed on newsprint imported from Canada." More layoffs likely will follow elsewhere. In the meantime, other papers are reducing page counts, raising prices, or both.

All this damage is being inflicted even before other countries retaliate. If they do, a global recession could ensue. And even if it does not, it would hit Americans in unexpected times and places. Such as prom night.

A recent piece in The Wall Street Journal examined the work of economist Jay Zagorsky, who used government data to show that prom night is an increasingly good bargain. In the past 18 years the Consumer Price Index has risen 45 percent—but prom expenses have risen only 25 percent.

"What has kept prices down?" asks reporter Jo Craven McGinty. "The short answer is imports." Since the turn of the century prices for women's dresses and shoes have remained steady, and prices for men's suits have fallen by nearly one-fifth.

"A lot of these things have been subject to import pressure," Zagorsky says. "The African flower market is growing tremendously and is pushing down prices around the world. Asia has been producing shoes at cheaper and cheaper prices and at higher and higher quality."

All of which could go away if, say, China decides to follow through on its threat and fight fire with fire. If that happens, Americans will find themselves not only shot but burned as well.

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  1. “Pennsylvania-based CP Industries, for instance, makes large cylinders to hold gases for the navy and other customers. Earlier this month, it had to pay a $178,000 tariff for a shipment of steel tubes…”

    Go figure, these Section 232 tariffs were ostensibly to preserve national security. But the US Navy has figured out a way project american power and support perpetual war efforts all over the globe with large cylinders made from foreign steel. It can be done.

    1. But but but… it’s Communist steel! What if the Navy gets Marxist cooties or something?

      1. Fun fact: Communist Steel was a nickname for Stalin’s Cock.

    2. CP Industries

      Good lord, I hope that stands for cheese pizza.

  2. Well. At least we’re discussing the state of the economy.

    There is always a bright side.

  3. Juror Says Women’s Testimony Less Important Than Cosby’s Confession To Romance By Roofie

    Snyder said hearing Cosby say in his own words that he gave drugs to other women was stronger in his eyes than the words of the five other women who testified against him.

    “In the deposition, he stated that he gave these drugs to other women,” Snyder said. “I don’t think it really necessarily mattered that these other five women were here, because he said it himself. That he used these drugs on other women.”

    1. Damn! What type of a social path slips drugs into someone’s food or dink?

  4. Protectionism to save jobs doesn’t work – I agree with that. But retaliatory trade tariffs are perfectly reasonable. Trump just needs to do a better job of identifying such opportunities and targeting them more precisely. As of now he’s a bull in a china shop (no pun intended).

    1. Re: Dajjal,

      But retaliatory trade tariffs are perfectly reasonable.

      Of course they’re not reasonable. You’re talking about taxing ME under the guise of protecting the jobs of white American Workers? somehow esch of us is supposed to care about.

      Fuck you. It ain’t your money.

    2. The Pew Research Center posted a comparison of tariffs in many countries. Our weighted mean tariff is 1.6%. China’s is 3.5%, Mexico’s is 4.4%, India’s is 6.3%, and Brazil’s is 8.0%. I’m not sure why Trump decided to target China, but then again, I haven’t been following the details of these trade wars.

  5. We’re already paying China’s hidden taxes on products from that country.

    Communism isn’t cheap.

    1. Actually the Chinese people are paying for that

  6. “After all: A tariff is simply a sales tax on imported goods. Guess who pays sales taxes?”

    The importer.

    1. Tim, Tim, Benzedrine! Hash! Boo! Valvoline!
      Clean! Clean! Clean for Gene!
      First, second, neutral, park,
      Hie thee hence, you leafy narc!

    2. O slender as a speeding freak! Spaced-out groovy tripper!
      O mush-brained maid whose mind decays with every pill I slip her!
      O mind-blown fair farina-head, friend of birds and beetles!
      O skinny wraith whose fingernails are hypodermic needles!
      O tangled locks and painted bod! Pupils big as eggs!
      O flower-maid who never bathes or even shaves her legs!
      O softened mind that wanders wherever moon above leads!
      O how I dig thee, Hashberry, from nose to sleazy love-beads!

    3. Snorting, sporting! Speeding through the arbor,
      Pushing till the folk you burn toss you in the harbor!
      Screeching like a dying loon, zooming like a thrush,
      Follow me and very soon, your mind will turn to mush!
      Higher than the nowhere birds grooving in the air,
      We’ll open up a sandal shop where everyone will share!
      Flower folk are springing up, wearing bead and boot,
      And if you down me you can stick a flower up your snoot!
      To Love and Peace and Brotherhood we all can snort a toast,
      And if the heat is on again, we’ll all split to the Coast!

      1. +1 Harvard Lampoon

    4. Tim, all costs of products and services are passed on to the buyer. Otherwise a company would go out of business.

      1. Not true. It is not automatic. It is up to the business and the marketplace.
        The cost of a product could rise 10% to a business, and it could still choose not to raise the price to the consumer, or to raise it a lesser amount or raise it a greater amount.
        Have you ever run a business?

        1. Furthermore, my answer to the question is literally correct. A tariff is paid by the importer.

        2. Absolutely – I’ve seen my profitable employers (actually, the shareholders) absorb higher costs to them when the market would not bear higher prices to our customers. This doesn’t mean, however, that tariffs have no adverse impact on consumers or the overall economy.

          1. Well said. Agree mucho.

  7. A-tiskit a-taskit,
    I go tit for tat with anybody who’s talking this shit and that shit
    Chris Kirkpatrick, you can get your ass kicked
    Worse than them little Limp Bizkit bastards
    And Moby, you can get stomped by Obie
    You thirty six year old bald headed fag, blow me
    You don’t know me, you’re too old, let it go its over,
    Nobody listens to Techno
    Now lets go, just give me the signal
    I’ll be there with a whole list full of new insults
    I’ve been dope, suspenseful with a pencil
    Ever since Prince turned himself into a symbol
    But sometimes this shit just seems
    Everybody only wants to discuss me
    So this must mean I’m disgusting
    But it’s just me I’m just obscene
    Though I’m not the first king of controversy
    I am the worst thing since Elvis Presley
    To do black music so selfishly
    And use it to get myself wealthy
    Hey, there’s a concept that works
    Twenty million other white rappers emerge
    But no matter how many fish in the sea
    It will be so empty without me

  8. Seriously though, between the Trump tax cuts and the last raise I got, I’m almost taking home what I did before divorce changed my tax status. Hundreds a month. Bool sheet.

  9. “What has kept prices down?” asks reporter Jo Craven McGinty. “The short answer is imports.” Since the turn of the century prices for women’s dresses and shoes have remained steady, and prices for men’s suits have fallen by nearly one-fifth.

    Maybe culturally appropriative prom dresses should be more expensive. /sarc

  10. Yes, the tariffs are bad. Do you think we might start importing more items from Africa, because the tariffs target China?

  11. Wow. It must be really bad.

    You mention Cato (which isn’t great since the coup), but cite the anti-free market group, Coalition for a Prosperous America.

    As orange goes red…………..

    }Reason
    Fair Minds and Fair Markets, Comrade

  12. Hence the steel tariffs might protect some American jobs in the steel industry, but it will destroy others

    Perhaps, perhaps not. But it will also keep steel production capacity in the US, which is not only an economic objective, but also a strategic one. And there is no question that it’s an important strategic objective.

    If we trade freely with a country that subsidizes their steel producers, we need to subsidize our steel producers as well or lose steel production capacity. And barriers to entry make it pretty much impossible to regain that capacity quickly in the US.

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