The million-dollar question about tariffs ๐Ÿงพ๐Ÿ’ธ

swine o'clock Aug 08, 2022

How do tariffs placed on goods going from one country to another really work? Why is it that some tariffs might be canceled or reduced now, such as those on goods coming to the U.S. from China? And now, the million-dollar question: don't tariffs contribute to inflation? If you’ve been asking yourself these questions, here are the answers to them, according to John Phipps. 

  • First of all, tariffs are taxes paid by buyers – American consumers – not sellers in China. So, the trade imbalance didn’t improve, but the prices of consumer goods increased. 

It’s been difficult to come up with any estimates because of the economic effects of the unprecedented and lingering COVID influence on world business, like disruptions in the oil industry and necessary and massive government assistance. Those two factors most likely caused the bulk of retail price increases, but recent research indicates tariffs added to the inflation numbers.

  • Removing the tariffs could lower the prices of many consumer goods.
  • Unkinking the supply chain-profit-inflation interconnection is now one of the big drivers: since consumers are conditioned to expect inflation and are still wary of supply problems, an opportunity to increase profit margins is hard for retailers to pass up.

There is another bonus to removing tariffs: reciprocal removal of Chinese tariffs means fewer taxes on goods we export to China – like ag products.