Trump Has No Idea How Tariffs Work And It’s Harming Americans

As President Trump ramps up his trade war with China, he further demonstrated his ignorance of how tariffs work - to the detriment of the American people.
U.S. President Donald Trump, right, listens to a speech by Chinese President Xi Jinping during a business event at the Great Hall of the People in Beijing, Thursday, Nov. 9, 2017. (AP Photo/Andy Wong)

U.S. President Donald Trump, right, listens to a speech by Chinese President Xi Jinping during a business event at the Great Hall of the People in Beijing, Thursday, Nov. 9, 2017. (AP Photo/Andy Wong)

Once again, President Trump’s ignorance is having a negative impact on Americans. Before last week, it appeared as if the United States and China may have been headed to a trade breakthrough. But as the Chinese delegation was arriving in Washington, the talks broke down.

By Friday, President Trump announced a new 25% tariff (up from 10%) on $200 billion worth of imports from China. The targeted goods include consumer products like luggage, backpacks, bamboo furniture, etc.

This week, China announced retaliatory tariffs on $60 billion in US goods set to be put in place on June 1st. China is targeting over 5,000 products, including food, building materials, electronics, natural resources, transports, and other consumer goods.

On Monday, the Dow closed 617 points down (2.4% drop). The Nasdaq took on a 3.4% drop and the S&P 500 closed down 2.4%. This was the worst one-day drop for the Dow and S&P 500 since January 3rd and the worst day since December for the Nasdaq.

President Trump, who once declared himself “Tariff Man,” took to Twitter and showcased his lack of knowledge when it comes to the primary tool in his trade war with Chinese President Xi Jinping:

That’s not how this works. Some may argue that President Trump is lying, but this is legitimate ignorance. Trump has demonstrated again and again that he is incapable of understanding the consequences of tariffs. When you place tariffs on imports into the United States from China, you are placing a tax on those products. Businesses who need those products to manufacture their goods will have to charge more for their products to offset the losses. This means that consumers will inevitably take on the added costs. Even White House Economic Adviser Larry Kudlow conceded this point.

Source: Bloomberg

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China’s retaliatory tariffs last year have hit specific industries very hard, like soybean farmers. The Trump administration had to issue $12 billion in aid to farmers after China’s tariffs took their toll. And now, Trump is promising new relief ahead China’s incoming tariffs.

In spite of those negative impacts, President Trump and the Republican Party have used farmers as pawns in this trade war even though many of them make up the Republican base. Senator Tom Cotton (R-AR) made it appear as if these farmers are willing participants in this trade war:

There are other industries affected of course. Steve Lamar, Executive Vice President of the American Apparel & Footwear Association, explained the negative impact Trump’s new tariffs will have on apparel in an interview with PBS NewsHour:

“Tariffs are taxes the Americans pay. They’re taxes that American companies pay. Ultimately, they’re taxes that consumers pay. And they’re taxes that result in job losses in the United States… If you realize that 82 percent of our backpacks and purses and travel goods come from China, 70 percent of our footwear comes from China, 42 percent of our apparel comes from China, when you tax these items, that is going to result in about a $500 increase for an average family of four.”

There will be a lot of uncertainty in the coming weeks. One can hope cooler heads will prevail, but judging by how this administration has operated, that isn’t likely.

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News // Donald Trump / Economy / Tariffs / Trade War / World / Xi Jinping