Trump's Tarrifying Economics
By Ethan Adkins
On January 20th, Donald J. Trump took office as the 47th president of the United States. On the campaign trail, Trump repeatedly stated that he would impose tariffs on our allies. Then, on February 1st, Trump implemented 25% tariffs on Mexico and Canada, and raised tariffs on China by a further 10%. These tariffs will impact everything from oil, lumber, plastics, and clothing to computer chips, and auto parts.
With all of these things being taxed, and politicians claiming that this is going to save America while others argue it’ll ruin America, I think it’s important to take a step back and ask a few key questions: What do we really know about the tariffs? What are tariffs? Will tariffs affect us in our everyday lives? Should we be concerned about them? And what can we do? So as we explore the topic, I'm going to try to answer these questions.
Before I started writing this article, I created a survey to collect data from people in Oklahoma with those exact questions. I wanted to see what the average person knows about tariffs, and the majority of responses showed that most people aren’t exactly sure what tariffs are.
Tariffs are taxes on imported goods. That's the very simple definition, however a common misconception of them is that the country we impose tariffs on pays that tax. For example if we tax Canadian timber, people often think that Canada will pay the tax, but in reality, the importing business pays that tax. Reviewing the answers to the survey, it seems that a fair number of people believe that we don’t pay that tax. In other words, American businesses end up paying, which we, the American consumers, end up paying that tax.
Let’s say an American business needs to import electronics from China to sell or to help their business grow. Those parts are now 10% more expensive than they were before Trump took office. Of course the companies won’t just pay more and keep the price the same. They will start passing the price on to the consumer, making them pay the increase in tax.
This raises the question: how will these tariffs affect our daily lives? Most everyone who responded to the survey thought the tariffs will increase the prices of everything. One comment, however, caught my attention. It stated that it may increase prices in some areas, but it won’t hurt local and small businesses. In actuality, the higher tax rate on imports could directly affect small businesses.
Based on a report from the New York Times , it mentions that things we don’t necessarily think about every day like businesses that build things and sell clothes will now have to charge more because of the 25% tariff on Canada. Small businesses give us the opportunity to support our communities while paying less than you would if we went to a major brand or business.
Outside of small businesses, things we need such as transportation could see a spike too. A report from Forbes says that a new car could see price hikes as high as $3,000, and trucks could see prices go up as high as $10,000. Gas could also see another price rise 40 cents per gallon, making it like it was again post-COVID levels, which may be unaffordable for some people living paycheck to paycheck.
The tariffs also affect how much money we’ll be spending on groceries. The price has already risen 25% since 2019. Now, those prices will once again rise, since the tariffs on Mexico and Canada also hit fruits, vegetables, meat, and even some alcoholic beverages.
The price of buying a car, filling it up, driving to the store, and buying food is all projected to rise, but let’s say you’ve also just bought a new home. Since Canada is a huge supplier of timber to the United States, the prices of building or buying a new house are also projected to rise. Walking into the house could also cost more since a lot of our footwear is imported from China.
After hearing all this, I’m wondering: how concerned should we be about the tariffs? In the survey, I asked people to rate how concerned they were, with 1 being not at all concerned, 5 being moderately concerned and 10 being very concerned. The vast majority of answers were above moderately concerned, with 23% being very concerned.
The biggest thing we have to be concerned about is the rise in prices that this could bring. The prices of many things such as gas, groceries, and housing are already pushing many Americans who are living paycheck to paycheck, to their limits. The tariffs will make everything more expensive from toys and shoes to housing and eggs. The effects of them could be felt for years to come. According to the BBC, inflation could rise by up to 4%. Meaning that even as we get out of high school we could still feel the effects of these tariffs years after they went into effect.
The final question to answer is: what can we do? While the tariffs could potentially be bad for the overall economy, there is still plenty we can do to help ourselves. An Article from OliverWyman makes four really good points but one to me sticks out the most. Assessing your exposure can be a huge deal in identifying what you need to start saving up for and what you don’t. Knowing which part of the tariffs will affect you is essential to helping yourself stay afloat. Another big tip is just staying informed. I know a lot of people don’t like to actually watch the news but keeping up to date with how everything will affect you is a crucial step into preparing yourself for what could be harsh prices.
