Let’s Talk Tariffs

But first – an apology and a correction from yesterday’s post on Pennsylvania. I have been corrected by people who have lived their lives in Pennsylvania that it is NOT Pennsyltucky as I was informed when I moved here, but rather “Pennsylvania is Philadelphia and Pittsburgh with Alabama in between.” I regret the error.

Now, on to tariffs.

A tariff is a TAX. The Convicted Felon can lie from here to Kingdom Come, and tariffs are still taxes. When you talk to voters, it’s critical that you understand this and can explain it in simple terms.

Basically, the dictionary definition is:

A tax or duty to be paid on a particular class of imports or exports. Source.

The Convicted Felon plan for tariffs will raise the cost of almost everything that normal people procure on a regular basis. A full list of his proposed tariffs is here. A historical listing of Convicted Felon Trump’s and President Biden’s tariffs is here.

Don’t let anyone tell you that the other country will pay the tariffs. The CONSUMER will pay the tariff.

So let’s look at a man’s cotton tee shirt, plain white, no lettering. This link will give you all the background to the research that went into, and behind, the chart below. You can see what it costs to manufacture and ship a bulk order of men’s cotton tee shirts from four countries to a domestic retailer. Of note, there is an assumption that the shirts are of equal quality. ¹

The Convicted Felon would add a 60% tariff to the shirts from China, and 20% to those from Bangladesh and Vietnam. The price of the domestic tee shirts from New Jersey would remain unchanged.

Doing some math, and assuming the shipping fees don’t change, we get:

The Convicted Felon is correct that this would hurt China, in that theirs become the most expensive tee shirts with his tariffs, and price-conscious consumers would no longer buy them. But his logic that this would help American manufacturing is incorrect. First, many people are buying the cheaper tee shirts, thus there is not an overall benefit to the NJ manufacturer, they are still noncompetitive with Bangladesh and Vietnam. Second, even the least expensive tee shirts would cost the American consumer at least 20% more: that is, the tariff, plus anything else the retailer adds in, such as the cost of switching manufacturers, if they are ordering from China.

In addition, other countries will end up placing tariffs on goods they import from the United States, impacting global trade. In certain ways, it becomes a vicious cycle: “You charge us more, we’ll charge you more. Oh wait, you raised tariffs more? We’ll match you.”

Are tariffs always bad? No. There is a place for targeted tariffs, although the blow back might be really bad. Let’s take EVs. They’re good for the environment. Mostly good, since there’s an environmental cost associated with the metals in the batteries. The ones made in the US are MUCH more expensive than EVs made in other places, especially China. The overly simplistic reason is that American car manufacturers went for the upscale market, and China went for the proletariat. In raw numbers, the cheapest EV in the US is about $30,000 (Nissan Leaf), and most are far more expensive (full list here.) Thus, theoretically, a tariff on Chinese EVs prevents the Chinese from flooding the US with affordable EVs, and consumers will buy domestic EVs.

BUT

This would be great if American carmakers decided to make less expensive cars, but they tend to make bigger, more feature-filled, monster SUVs.² The money-making proposition is much better for the bigger vehicles. But pretend that US automakers are willing to make smaller, cheaper cars. There MAY be hope for that, since Chevy decided to put its Bolt on hiatus, instead of permanently discontinuing it, as had been the original plan. At a basic level, if American automakers could make cars like the Bolt, they potentially could be competitive with Chinese brands like BYD (Build Your Dreams), especially with large tariffs. As an aside, last year BYD became the world’s best selling EVs, beating out Tesla. Source.

But this wouldn’t happen in a vacuum.

Beijing has also said tariffs could put strains on the U.S.-China relationship and, besides retaliatory tariffs, has floated the idea of China also restricting exports to America of rare critical materials on which it has a near monopoly, harming U.S. industry. Source.

These “rare critical materials” include lots of raw materials, like lithium, chromium, cobalt, graphite, copper, and manganese, as well as many pharmaceuticals especially for blood pressure and cancer.

But the important thing to remember is that when you talk to voters TARIFFS ARE TAXES THAT YOU, THE VOTER, WILL PAY FOR. Right now, many Americans think the Convicted Felon would be better for the American economy than Vice President Harris because tariffs will pay for childcare, and China, not Americans will pay. You only think I make this stuff up.

While economists disagree on how much tariffs will cost the American consumer - some say a thousand, some say up to $4,000/year per average family, there is no doubt that if you go to the store to buy something, and it costs the retailer more than it used to, you will end up paying more for it.

1. The cheapest cotton tee shirts are thinner, and made of lower quality cotton than others. The cheapest one I could find is $3.48 at Walmart. You could spend $90 at Nordstrom for pima cotton. If you’re very rich, or insane, you could spend upwards of $2,000. But for our discussion, we’ll assume our shirts are the same.

2. I have a very unpopular view of cars. I view them as transportation, not status symbols. People buy huge SUVs to commute ALONE to work. They buy trucks to haul basically nothing except every once in a while. Americans love their bells and whistles. So American automakers build what will sell.