Donald Trump wants you to pay more for smartphones, TVs and a lot else
What to do about China? It employs millions of people manufacturing things that used to be Made in America, and sells way more stuff to the United States than it buys from us.Donald Trump’s solution is to get tough on China by imposing steep new tariffs on products made in China. The Republican presidential candidate told the New York Times recently that he’d levy a 45% tax on Chinese imports. The idea is to make Chinese goods more expensive so that American producers who pay their workers more can gain a competitive edge.
There’s a painful side effect to this plan, however: It would, well, make a lot of products more expensive, and most of the price hikes would come straight out of consumer wallets. China ships about $500 billion worth of goods to the United States every year, which is about one-fourth of all imports. Goods from China include iPhones, TVs, clothes, furniture, toys and a lot of other things found in nearly every American home. A 45% tariff on Chinese imports would encourage other low-cost exporters, such as Vietnam, Bangladesh and Mexico, to ship more goods to America. Whether U.S. producers would gain an edge is debatable.
Consumers would feel the pain
Protectionists often argue that the cost of tariffs is borne largely by producers in foreign countries. But inevitably, some or most of any additional tax gets passed on to people who buy the products. “When you institute a tariff, the price goes up for consumers,” says economist Adam Ozimek of Moody’s Analytics. “People will also buy less. So consumers are hurt not just by rising prices, but by consuming less.”
The portion of Trump’s 45% tax that would be passed onto consumers would depend on how much competition there is for any given product.
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