Tariffs

NEWS: (Feb. 1, 2025) President Trump imposes 25% tariffs on Mexico and Canada and 10% on goods from China to address the flow of Fentanyl.

RATIONALE: The extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl, constitutes a national emergency under the International Emergency Economic Powers Act (IEEPA). https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china

NEWS: (Feb 4, 2025) President Trump Drops tariffs on Canada and Mexico.

Mexico agreed to post 15,000 troops on the border. This is the same number of troops that Biden posted on the border under his presidency.

Canada agreed to institute a $1.3 Billion border plan and appoint a “fentanyl czar”. This is the same amount they announced in December 2024. Last year Canada intercepted just under 45 pounds of Fentanyl at the border.

NEWS: (Feb 10, 2025) President Trump announces Tariffs on steel and aluminum.

What is a tariff?

A tariff is a tax imposed by a government on a company’s products that are imported into the U.S. For example, a 10% tariff on Chinese goods imported by Walmart into the US, would raise the cost of those goods by 10% to Walmart. Companies that export goods pay tariffs, not governments.

The positive side of tariffs is they generate revenue for the country that imposes the tariffs. They also encourage companies to establish manufacturing facilities inside the US to avoid additional costs.

The negative side of tariffs is they often are met with opposing tariffs on goods exported to the other country in retaliation. This is often referred to as a Trade War. For example, a tariff on imported electrical goods from China might be met with a tariff by China on US agricultural products. This reduces demand for imported products and encourages the importation of goods from other countries without tariffs. This can lead to a permanent shift in supply chains.

Another cost is that companies often pass the higher costs of imported goods on to the consumers, so ultimately the tariffs could end up raising the cost of goods to the consumers.

Bicycles built in China were among the products on Trump’s tariff list. A 10% tariff on a bike with a wholesale cost of $60 would add $6 to Walmart’s cost of importing that bike.

Many companies assemble products that use parts imported from other countries. As a result, tariffs can raise the cost of domestically produced products as well.

While tariffs can encourage companies to create domestic manufacturing it can take years to build new plants. This can lead to shortages due to production disruptions.

Here is what Investor’s Business Daily said about tariffs-

In today’s market-leaning global economy, many economists argue that they are bad for the economy and harmful to consumers.

For instance, the Smoot-Hawley Tariff could be perceived as worsening the Great Depression in the 1930s. In an attempt to strengthen the U.S. economy during the Great Depression, Congress passed the Smoot-Hawley Tariff Act, which increased tariffs on farm products and manufactured goods.1 In response, other nations, also suffering from economic malaise, raised tariffs on American goods, bringing global trade to a standstill. Because of the tariffs during that era, economists have estimated that overall world trade declined about 66% from 1929 to 1934.2