Raging Tariff Wars Raise Concerns in the U.S.
Following Trump’s inauguration in January, the U.S. enacted a plan to raise tariffs in order to improve tax rates in the U.S., lower immigration rates, and protect domestic industries. This plan was initiated through the implementation of the External Revenue Service (ERS). However, it soon led to unforeseen consequences.
It’s important to understand what tariffs are before delving into this issue. Generally, tariffs are taxes on imported goods. They can result in increased prices for these goods, uplifting domestic products by making them appear cheaper. In some cases, tariffs can be used to check other countries and punish them for their behaviour, pushing a practice onto them.
Tariffs are not paid by the foreigners importing goods, but rather by American importers. A transfer of money occurs between the importers and Customs/Border Protection in order to allow the goods to pass into the U.S. Still, they can lead to lowered demand and therefore less profit for the taxed countries.
What Events Have Tariffs Caused?
At first, the implementation of tariffs seemed to be quickly achieving Trump’s goals. Only 6 days after his inauguration, the president had threatened Colombia with tariffs after it refused deportation flights. The country soon began to accept these flights, albeit begrudgingly.
The president went on to enact tariffs on China, Mexico, and Canada under the guise of a ‘national emergency.’ Products such as steel, aluminum, copper, and timber were highly impacted.
Tariffs vary based on the country and product they are being placed on. Prior to the raising of tariffs on Mexico and Canada, a majority of goods moved across the border freely due to the U.S.-Mexico-Canada trade agreements.
While Mexico and Canada have consistently been taxed 25% on imports to the U.S., Chinese imports rose in March from 10% to 20%. The rise of tariffs sparked anger in China and concern in the U.S.
Countries, such as China, were quick to retaliate against the taxes imposed on their U.S. exports, leading Trump’s administration to push for reciprocal tariffs. Upon the implementation of steel and aluminum tariffs in March, Europe and Canada also began planning retaliation.
Europe planned to tax U.S. whiskey, to which Trump retaliated with a threat of 200% tariff rates on their wine. In late April, Chinese tariffs on U.S. goods rose as high as 125%, forcing the U.S. to temporarily exempt smartphones and laptops from their tariffs.
Impact of Tariffs
Foreign countries are primarily concerned about reduced sales of products. While American importers are the ones paying taxes, this often means that the products will become more expensive in the U.S. and drop the country’s demand. However, this can also impact businesses reliant on foreign trade.
This is partially what President Trump wants. In dropping foreign demand, the U.S. begins rushing to find new ways to meet its needs and wants. This gives a higher chance for domestic producers to become dominant in the industry with cheaper prices.
Still, the increase in taxes would affect several people worldwide by creating inflation in prices and making some products unavailable to the broad public. Employment rates may fluctuate in countries with high tariffs, and trading relations may change.
Locally, students worry about tariffs and the effect they may have not only on the rest of the world, but also on their local communities. Students at MLEC, as well as other schools, have voiced their opinion on the topic.
“As the daughter of a small business owner, I have seen how the tariff war has affected my dad’s business. My dad had been working as an air conditioning and electrical technician for boats for 9+ years, but started his own business 3 years ago.
“The tariff war has affected my dad’s business by leading to fewer customers fixing their boats due to increasing material prices, materials needed to fix the AC/electrical system in their boat. This decrease in customer demand is happening to a lot of businesses,” said senior Lena Fucci.
Other students have commented on the constantly changing tariff rates caused by the back-and-forth between countries. They worry that the constant change may leave many confused and portray the U.S. as unstable.
“My main concerns are that prices on imported goods will soar and diplomatic relations with other nations will weaken. I think the calculation for the reciprocal tariffs is ridiculous, and Trump’s on-and-off with tariffs make the government look bad!” said sophomore Virginia Ladeira, a student at American Heritage.
The issue is still ongoing as of this April, but it’s clear that tariffs have made a large impact on a broad number of individuals in a very short time. As the tariff policies develop, we’ll likely see more large events and impacts like this one.
