Real Clear Politics posted an article today titled, “Why Trump’s Tariffs Won’t Cost Consumers a Nickel.” I’m not sure I totally agree with that, but the ideas behind the statement were interesting.
The article states:
Critics also contend that President Trump’s tariffs will inevitably lead to higher prices for consumers. We’ve heard this before. They said aluminum tariffs would spike the cost of a six-pack. But soda and beer prices have remained flat.
Now Walmart has joined the chorus. But we have no more reason to believe officials there than other boys who cried wolf. To understand why, let’s review how tariffs work, and how specifically the president’s tariffs work.
…Tariffs aren’t imposed on the final retail price the way a sales tax is. They are also not imposed on the wholesale price. They are not even imposed on what the importer pays at the dock when the goods enter the U.S. The duties are imposed on an even lower price than that – and that’s a scandal in itself.
Let’s say Black & Decker wants to sell a line of toaster ovens with a $60 retail price in the U.S. It goes to a Hong Kong middleman who deals with Chinese manufacturers. The Hong King middleman pays his cousin at a Chinese toaster oven factory $10 for toaster ovens. Black & Decker agrees to pay the Hong Kong middleman $20 for the toaster ovens, and picks them up off the boat in Long Beach, Calif.
Let’s say there’s a 10 percent tariff on toaster ovens from China. (There isn’t.) The tariff would only be $1 because it’s calculated on what the Hong Kong middleman (says he) paid his cousin at the toaster factory – the first sale — not what Black & Decker pays to take delivery at the port – what’s known in the jargon of the trade world as the last sale.
As a result of this accounting flim-flam, Hong Kong middlemen and the importers who love them are getting rich while taxpayers are getting hosed for untold billions of dollars the U.S. Treasury is not collecting.
The article concludes with information that shows the wisdom of what President Trump is doing:
And here’s the beauty part, how the tariffs are designed to hurt China: The Trump tariffs target items available from sources outside China. Buy from a supplier outside China, avoid the tariff.
President Trump’s surgical strike tariffs are sending companies a clear message: Do business anywhere but China.
And the message is getting through. Companies no longer see China as a safe space. China needs a continued influx of foreign investment to feed its economic growth, and the president’s trade policy encourages companies to look elsewhere.
This is the reason it is good to have a businessman in the White House instead of a politician.