Throughout the course of Donald Trump’s presidential campaign he kept saying that he wanted to get rid of free trade. And it looks like he’s following through, but it’s not necessarily a good thing.
While fair trade is optimal, Trump and his transition team are currently looking at imposing a 10% tariff on all imports into the United States. Which is pretty much all our goods, sans a few solid American companies who are actually ethical.
According to CNN:
“A senior Trump transition official said Thursday the team is mulling up to a 10% tariff aimed at spurring US manufacturing, which could be implemented via executive action or as part of a sweeping tax reform package they would push through Congress.
Incoming White House Chief of Staff Reince Priebus floated a 5% tariff on imports in meetings with key Washington players last week, according to two sources who represent business interests in Washington. But the senior transition official who spoke to CNN Thursday on the condition of anonymity said the higher figure is now in play.”
And while on the surface, imposing a tariff seems like a good idea because it may serve as motivation for companies to manufacture goods here at home, what’s not great is the fact that an instant tariff wouldn’t so much hurt the companies, as it would the consumers — American citizens.
“At least one business community organization is worried enough about the prospect of the tariff it already has prepared talking points, obtained by CNN Wednesday night.
“”This $100 billion tax on American consumers and industry would impose heavy costs on the US economy, particularly for the manufacturing sector and American workers, with highly negative political repercussions,” according to the talking points. “Rather than using a trade policy sledgehammer that would inflict serious collateral damage, the Trump administration should use the scalpel of US trade remedy law to achieve its goals.””
The talking points also claim the tariffs would lead to American job loss and result in a tax to consumers, both of which would harm the US economy.”
In a perfect world, companies would absorb the costs of a tariff into their cost of doing business, but we don’t live in a perfect world. You can best be sure, with the interests of shareholders at heart, that these companies aren’t going to just pay the tariff, but rather shift that extra cost over to consumers.
So, prepare for everything to get a lot more expensive if Trump actually follows through with this tariff. It’s irresponsible at best, and while some will say it’s good to tax these companies that outsourced jobs overseas – and it is – doing so this fast is only going to make it so companies shift costs, instead of having well thought out reform that won’t harm consumers or jobs.
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