In the long term, it’s true that some companies will have an incentive to build in the U.S. to avoid the tax. While this would help create jobs, it won’t lower prices. One reason factories are located abroad is that there’s less regulation surrounding employee pay. Building in the U.S. may provide jobs, but it could also drive up costs, as institutions would be paying more for labor. Overall, this hurts businesses and ultimately harms American consumers.
The Trump administration recently imposed widespread tariffs on foreign imports, claiming that the U.S. has been taken advantage of for years and that these tariffs will create a “level playing field” for trade. The administration argued that the tariffs would encourage companies to manufacture goods in the U.S. While there’s some truth to these ideas, a closer look reveals that these tariffs have likely caused more harm than good.
So, what exactly are tariffs? They are taxes imposed on companies importing goods into a country. However, many economists argue that tariffs are a tax on the citizens of the country imposing them. Companies, facing higher costs, raise the prices of their products, which increases the financial burden on consumers. The immediate effect of Trump tariffs? Higher domestic prices.
How did the Trump administration calculate the tariffs, you may ask? They took the trade deficit and divided it by the imports from each country. This formula, however, is arbitrary. According to Erica York, an economist at the Tax Foundation, the White House is naming policies they’re supposedly reciprocating against, though none of them are considered in the formula. It seems like a reckless approach by the administration to use never-before-seen tactics with little validity according to tax experts.
Soon after the tariffs were implemented, countries such as China, Canada, Mexico, and the European Union retaliated with their own tariffs on American goods. This will result in higher domestic and foreign prices, creating a lose-lose situation. On top of that, the tariffs have strained international alliances. Citizens in countries like Denmark and Canada have started boycotting American products, and tourism to the U.S. has decreased. This is awful for both the tourism industry and the broader economy.
The market has been volatile since the tariffs began. On April 2nd, when they took effect, the S&P 500 dropped by 6%, the worst day since the start of the COVID-19 pandemic. Just a week later, on April 9th, the administration ended the tariffs on every country except China, causing the market to increase drastically. If tariffs are such a great option for our economy, why are we delaying? Trump couldn’t possibly have made a mistake—his tactics are just far too complex for us mere mortals to understand.
Tariffs also have broader consequences. By restricting access to foreign markets, the administration has encouraged domestic growth but also inhibited competition. Competition is crucial for innovation. Companies have little incentive to improve when they know they’re the only option on the market. This is especially concerning in industries where progress is essential, such as healthcare. Our well-being shouldn’t be compromised in such a way.
Under the guise of “America First,” the Trump administration’s tariffs have raised prices, threatened alliances, disrupted tourism, caused market instability, and limited innovation—all at the expense of American citizens. Are these results worth the minor benefits?
