What Would Tariffs Do To American Businesses?

Tariffs. The talk of the news right now. Many people are stressing over them, others are praising more being enacted. Why are so many discussing them now? Well, currently the President of the United States, Trump, is imposing many tariffs on the bordering nations Canada, China, and Mexico. According to the White House, they are doing this in order to hold them “accountable” for the many immigrants coming into the U.S. illegally, which is an indicated problem in the White House. These tariffs are being used in a way to “fix” the border situation. However, many people are arguing against it. Economists are stating that instituting these tariffs will only drive the prices of goods and services in the U.S., and cause much stress for citizens. It also poses a problem since Canada, Mexico, and China are our biggest trade partners. These tariffs will cause more problems for U.S. citizens, and they most likely will not outweigh the problem of illegal immigration. 

Before we discuss, defining what tariffs are is important. Tariffs is a tax on imported goods at its core. They are enacted on another country to influence them, raise revenue, or protect the competitive advantages of the imposing country. So, when a good is imported into a country, for example, and there is a tariff imposed, the price of that good will increase for the buyer in the receiving country since the exporter will be more likely to increase the price to meet the tax. The U.S. has done this before in our history. In the early 1900’s, the U.S. used taxes as income for the government, which was before income tax was enacted. When the Stock Market crashed in 1929, according to the Fordham Journal of Corporate & Financial Law, the U.S. enacted tariffs towards Europe to help American farmers from economic burden, and Europe retaliated with tariffs of their own. This caused trade between Europe and the United States to decline significantly by roughly two-thirds. This problem was a reason to turn towards Free Trade in the United States because of the negative effects from a significant trade partner at the time. This example from U.S. history shows what could happen if we tariff Canada, China, and Mexico today, since they are our biggest trade partners today. 

Many people are beginning to get concerned with enacting more tariffs. Majority of the opinion online describes that it would negatively affect the economy. Peter S. Goodman from The New York Times writes that adding additional tariffs would cause “American factories to pay more for chemicals and plastics”. America gets many of its plastics from Canada, and some from China and Mexico. As well, many American companies use plastics in their products. So, if there would be a tax on imported plastics, the companies that make the plastic would raise prices. This causes American companies who use plastics to raise the prices for their products. Prices for things will increase. Additionally, the BBC disagrees with these new tariffs through examples. Ben Chu from BBC describes how Trump had imposed a tariff on imported washing machines in 2018, and that many Americans paid more for a washing machine after the tariff than before. This example from Trump’s past term shows how 1) he has done this before, and 2) that it did not have the effects many would assume to be good. With these negative effects, many believe that these tariffs will not be beneficial. 

Tariffs will most likely cause more problems for U.S. citizens, and they will not fix the problem of illegal immigration. As much as immigration and undocumented immigrants have been a problem in the United States, tariffs will not be a solution for it. Using tariffs as a political statement will most likely not work on successful, bigger countries. Countries, such as Canada, Mexico, and China, will be likely to “fight back” and instill tariffs of their own or just not sell to the United States. There is limited evidence that these countries will meet the U.S. demands on immigration. Besides, the new tariffs being imposed will hurt American citizens. Canada, Mexico, and China will most likely either impose tariffs back or raise the prices of their products. This means that citizens will begin paying more for their day-to-day goods, like what we have seen with the washing machines in 2018. At the end of the day, these tariffs will not fix immigration in the U.S., it will just raise prices.

*** I do not own the rights to this photo! All credit goes to Patrick Tomasso!