Trump Tariffs Are a Tax on Christmas – Higher Prices

President Donald Trump has been implementing various trade tariffs throughout 2018. In January, he imposed tariffs on imports of solar panels and washing machines.  Soon thereafter, he imposed tariffs on steel and aluminum, although some major trading partners were exempted from these trade sanctions.

In July, Trump ordered more targeted tariffs on more than 800 categories of imports from China, which were estimated to cost China at least $200 billion in lost revenues. Those tariffs on China are expected to more than double starting in 2019. This is a serious trade war if it continues.

As I have written often in the past, trade wars with foreign countries only result in higher prices paid by Americans on the goods we buy which come from other countries and products we make here that contain foreign imports subject to the tariffs.

The threat of an increasing trade war with China has been one of the main factors that have spooked stock prices significantly lower in recent weeks. This threat of a worsening trade war has been widely reported in the media.

President Trump and China’s President Xi Jinping will be meeting late this week and over the weekend at the G-20 Summit in Buenos Aires, and some believe the two leaders could reach an agreement to end the trade war.

I think that is too optimistic because both leaders have staked a large part of their political fortunes on not caving on this issue. Both have vowed not to back down. On the other hand, the two leaders could meet and make a joint statement that they made some “progress,” or that another bilateral meeting is planned, and that could be interpreted as a success.

Yet assuming I’m right and the trade war is not averted at this weekend’s G-20 Summit, then we Americans will continue to face higher prices on goods that are imported directly from China and on products that are made here in the US but include parts that come from China. You could call it a “Tax On Christmas.”

Thousands of potential holiday gifts, large and small, could cost more this year because they are now subject to tariffs – toys, phones, computers, luggage, and clothing – just to name a few.

And in a truly Scrooge-like development, it’s not just the things inside the packages that will cost more. As Americans prepare to wrap their holiday gifts, products like tape, curling ribbon, stickers and decorative snowflakes are now on the tariff list.

The way many politicians talk, you would think that tariffs are paid by foreigners. They aren’t! American businesses large and small pay this tax to our government and then pass the cost on to us – their customers. And that cost is likely to be steep – a 10% tariff on more than $200 billion worth of Chinese-made products, and more than doubling to 25% come 2019.

While some analysts say it’s possible that the worst price increases will not come until after the holidays, for many items you won’t be waiting until after the Christmas rush to feel the effects. The administration’s actions on trade are already driving up the cost of items Americans buy every day – including staples such as toilet paper, toothbrushes, car seats, mattresses, etc., etc..

For lower and middle-income families who can’t afford to pay more, the impact could be particularly painful. And, unless the tariff tit-for-tat ends, the pain will be sustained. But American families will not be the only ones made to suffer higher prices.

American manufacturers, farmers, ranchers and other exporters are finding it tougher to sell their products abroad because the onslaught of US tariffs has predictably drawn retaliatory tariffs from our foreign trading partners.

Consumers, businesses and American workers dependent on trade are all in the crosshairs of an escalating global trade war. Layoffs on the assembly line and lower profits for farmers, ranchers and others don’t make for a very Merry Christmas. General Motors just announced late last week that it is laying off at least 15,000 US workers just ahead.

The Trump administration’s expressed goals – to stop bad trading practices and move toward a system of zero tariffs – are worthwhile, and efforts to further open markets for US exporters should be encouraged. But there are better ways to achieve those goals than the Grinch-like imposition of tariffs that hurt us far more than the intended foreign target.

It doesn’t make sense to punish American families with trade barriers when our goal is eliminating such barriers. The better way is to work with allies to put pressure on those who are breaking the rules. We are, after all, China’s largest customer!

The nation’s economic winning streak is on the line, and we must do everything we can to ensure that growth continues. Placing additional and unnecessary costs (tariffs) on American businesses and families is NOT the answer.

President Trump should know this, but apparently he doesn’t. And why are his trusted advisors, such as Larry Kudlow, who knows better, not speaking out publicly? Kudlow is deferring to Trump’s senior trade advisor, Peter Navarro, a Democrat who favors tariffs.

So, unless Trump and Xi reach a surprise deal in Buenos Aires this weekend, expect to be paying more for many of the things you’re planning to buy this Christmas season. Not good.