A quick primer on tariffs

One thing we know about Donald Trump from his one term as president was that the dude never met a tariff he didn't love. After decades pursuing a relatively liberal trade policy, the US began to revert to a more protectionist approach to economic policy. Although the Biden Administration has not really made moves to massively expand tariffs, the administration has maintained many tariffs from the Trump era. If Trump darkens the White House once more, there is a good chance that we will experience tariffs the likes of which none of us have experienced in our lifetimes. It's a complex topic, and since I am not an economist (nor will I pretend to be) but rather a layperson who likes to be informed, I am always grateful to reality-based primers. Axios does just that. 

So what do we need to know? A tariff makes it more expensive to import many of the goods we take for granted. Someone has to pay. Guess who that someone will be. It will be you and it will be me. We could try to count on the generosity of those companies that import goods to swallow the cost and in turn reduce their profit margins, thus allowing us to remain oblivious. Don't bet on that outcome. The reality is that we will simply pay extra when we go to the stores or shop online. Let's pretend that it costs a dollar to import a package of freshly picked blackberries, and by the time it gets to the store, that package is marked up to $4. That's $3 in profit. If a tariff made it cost $3 to import that same package of blackberries, that markup to $4 no longer makes as much sense for the grocer. So most likely you will now pay $6 for what you used to pay $4 for. Or the incentive to import blackberries could be entirely removed and we have to learn how to do without them when they are out of season in most of the US. As someone who loves to snack on blackberries, I would quickly notice their absence. 

If you are starting to wonder if a tariff sounds suspiciously like a tax, it is because that is exactly how a tariff functions. You and I get taxed because of a decision by whoever occupies the White House (I will use Trump in this scenario), and we pay a higher price on whatever goods are targeted by tariffs. The claim that the nations targeted by tariffs are the ones paying is false. Anyone telling you that is lying. Yes, Trump is lying when he makes that argument (we'll call his stream-of-consciousness rants an argument for the sake of convenience for now) that you won't pay for tariffs. You will. You hate inflation? So do I. Tariffs have the potential to keep inflation well above the 2% level that is considered optimal for keeping the economy humming. Our dollar will buy us less, and I wouldn't exactly count on an pay increases to keep up. We saw how well that worked out for us in 2022 and last year, and I have some lived memory of what it was like growing up under double-digit inflation back in the 1970s and early 1980s. You learn to do without a lot of stuff because it simply is out of reach - and my late father usually had pretty decent paying jobs in the aerospace industry. I am relieved that our own inflation situation was never quite that bad and that it is easing up to almost optimal (we have a little ways to go, but there is hope now).

It is also foolish to pretend that the leaders of those countries we target with tariffs will just shrug their shoulders and accept a loss in trade. More realistically, we should expect some form of retaliation. The scope and duration of that retaliation may vary, and the potential for a trade war becomes very real. If that happens, we can expect a race to the bottom as the participants in a trade war continue to increase tariffs, robbing their respective citizens and residents of their spending power. Trade wars can also make things difficult for farmers and industries to export their goods, which can result in financial losses, layoffs, etc. If the potential for a recession is what you really want, that's a winning formula, I guess? For the rest of us, this seems like a loser. Friendly reminder: Trump's tariffs late last decade hurt farmers and rural communities the most. Granted, a diet of Fox News and talk radio probably told folks in affected rural communities and affected farmers that Trump was sticking it to the Chinese (for whom there is a lot of racial animosity dating back to the 19th century) so that their suffering was supposedly not in vain, and that probably worked enough to win their votes in 2020. Spoiler alert: their suffering was in vain.

You might be surprised that a died-in-the-wool Democratic voter would advocate economic liberalism. It's possible that I'm not your ordinary Democrat. Economic liberalism is certainly not without its downside, and policies that keep trade and wages equitable are ones I will advocate for. If you are going to restrict trade, it is best to exercise caution. There needs to be an objective. There needs to be an endgame. If we're just imposing exorbitant tariffs on Chinese electric vehicles for the sake of imposing tariffs, we're doing it wrong. Now, if we're doing so because we realize that there is a very tangible problem, which is that American electric vehicles and really American vehicles in general are very large and resource intensive, and also far too expensive for most of us, and that American manufacturers simply cannot compete at this point in time, I can see an argument that would be sensible. To me, the idea would be to buy time for our manufacturers to get their act together and stop focusing as much on fully loaded electric Ford F-150s and Hummers and retool their plants to manufacture compact sedans and hatchbacks that would be less expensive to produce and more affordable for those in the market for a new vehicle. We keep manufacturing jobs at home and have our manufacturers ready to compete within a short but reasonable time frame. That tariff could quickly be sunsetted and that would be the end of it. But when we start talking blanket 10%, 20% or 60% tariffs, or whatever percent might spew from what remains of Trump's demented brain, we're staring down the barrel of trade wars and high inflation, with very little in return. 

Note that I haven't even touched on the fact that after many decades of globalization, even domestically manufactured products contain imported components. Your "import" product might actually be manufactured here. Unwinding all of that would be a very long and risky process, and we're never really given a clear vision of what the benefit is supposed to be. What I do know is we are looking at another nasty inflationary cycle as a probably outcome of whatever the hell it is Trump is rambling about if Trump ends up occupying the White House again. Vote accordingly.