November 16, 2024
So we all know president-elect Trump is all about tariffs.
10-20-60-100-2000%. He’s thrown around a lot of numbers on the campaign trail. But I’m sure what you care about is – if and when he imposes these tariffs for real – how will they impact you, your family, and your wallet?
This is a deep dive video so buckle up or favorite this video and come back to it when you have a few minutes.
I say buckle up because the retailers and tax experts in this country have estimated these proposed trump tariffs could cost you as much as $7600 more per household every year and as little as about $1900 more per household per year. I’m going to show you the numbers in a second – but first let me back up.
You need to understand – yes Trump can legally impose these tariffs. And no there is nothing to indicate that he is kidding about any of these numbers. In Article 1, Section 8 of the constitution – it says Congress shall have the power to lay and collect taxes, duties…to regulate commerce with foreign nations.” That includes tariffs. Tariffs were a part of our country’s founding. While it *is* congress’s constitutional power — Congress can and has for decades delegated that tariff setting power to the president.
A tariff – is a tax imposed by the government on imported or exported goods. Tariffs can be used as a revenue source for the country that is issuing the tariff but tariffs can also be used to penalize foreign countries for a lot of reasons. Tariffs have been used by the United States on goods coming into this country from other counties and other countries have slapped tariffs on US goods going into their countries. And that’s been happening forever. That means we have a lot of data on tariffs. Here’s what we know for sure – a tariff is generally not paid by the country that is supplying the imported good. The tariff is paid by the importer of that good. That means person or company in the United States that collects the foreign imports from customs and border protection. And generally, those US companies then turn around and jack up the price of that imported good to sell to you. So in the end – generally you’re the one paying for the tariff. Not China. Not Mexico. Now – the talking point to support tariffs is by imposing them it will make imported goods too expensive so American retailers and companies will choose not to import and instead will bring manufacturing back on to u-s soil and make the products here in America….creating more jobs. But the reality is – while maybe that worked in the early 1900s, there is no recent evidence that shows American companies these days are going to do that. In the end – its probably going to be easier and cheaper for those American companies to just import the cheaper product from abroad, pay the excessive tariff and just charge you more. Now – I can go deeper into the research that proves all of that – but that’s a whole separate video. In this video I want to focus on that new study that estimates American households could be paying between $1900 and $7600 more per year because of these tariffs.
The fact is – all presidents have imposed tariffs on other countries. That’s not new. But what is new is the fact that Trump wants these huge unilateral tariffs. No one can tell you for sure exactly what Trump’s tariff policy will mean for your wallet simply because he’s not in office yet and he has not officially been able to impose these tariffs. But we can look at Trump’s history in office and we can look at the studies that have been done recently on his new proposals from economists and from u-s retailers.
The National Retail Federation which represents all the retailers in the United States issued this report just last week which used six consumer items that appear in most homes in America. Apparel, toys, furniture, household appliances, footwear and travel goods. This report took those things and looked at two proposed Trump tariff scenarios that he’s discussed publicly.
Scenario one is a universal tariff of 10% on all imported goods into the United States from all countries plus an additional 60% tariff on imports from China. And scenario two includes a 20% universal tariff plus an additional 100% tariff on all imports from China. These are all real numbers the president elect has talked about.
Here is the chart of the percentage increase if those tariffs are imposed. The light grey is the current tariff placed on each of those seven items, the black bar indicates how much that tariff would increase under scenario 1 of the Trump tariff proposal and the red bar indicates how much that tariff would increase under scenario 2 of the Trump tariff proposal.
And the National Retail Federation estimates for just these six items – that will cost consumers between $46.2 billion and $77.6 billion. That breaks down to between $362 and $624 dollars more per household every year. And that’s just for those six items – which only account for about 7% of the total goods that we buy, consume and use that may be subject to these tariffs.
But maybe that’s too abstract for you. So let me make it more understandable. Let’s look at apparel. For example — the report found under trump tariff scenario one or two ..a pair of men’s jeans would go from $80 to between $90 and $96. Women’s cotton sweaters would jump from $50 to between $56 and $60 dollars. After the tariffs are imposed couch that costs $1500 now — add between $96 and $143. Footwear in particular according to the retail federation would increase significantly. A pair of athletic shoes that costs $90 now – would cost between $106 and $116 dollars. For some of you those increases may not be a big deal. But it certainly would be a big deal for lots of other Americans who are already struggling.
Now – I am not telling you any of this to scare you. But I do want you to be fully aware of what these tariffs could mean for you and your wallet. I also want to throw in there that these could also increase inflation and decrease American GDP growth but that’s a whole other story. Of course, as I said at the beginning – all these numbers are estimates. How much things are going to cost – if they change at all — will depend on how much and how far Trump wants to go with these tariffs once he takes office. In his first term Trump definitely used his presidential authority to increase tariffs and President Biden has also exercised his tariff power. But neither of those examples are to the level trump is talking about now. And if you think these new extremely high Trump tariffs are going to bring in lots of revenue to the United States — according to the congressional budget office – over the last 70 years tariffs have never accounted for more than 2% of the total federal revenue.
Listen – tariffs absolutely have a real function and they can help especially when it comes to deceptive trade practices between countries or saving American industries…but it’s a balancing act. On one side – leaders have to weigh how much do you want to punish foreign imports and use tariffs as trade leverage and on the other side — how much do you want to financially impact the American public with increased prices. Because – let’s face it – Americans aren’t going to stop buying stuff — we have an overconsumption problem in this country. And prices are high now – but the numbers prove we’re all still spending.
Read the National Retail Association report on tariffs here.
Read the Petersen Institute’s report on Trump’s tariffs here.
Read the Tax Foundation’s report on Trump’s tariffs here.
More from the Tax Foundation on Trump’s tariff proposal here.
Read the Congressional Budget Office’s report on tariffs here.
