by Felix Richter,
Nov 12, 2024
While many economists have pointed out that tariffs are usually paid for by consumers in the form of higher prices – studies have found that Trump’s plans would cost an American middle-class family between $1,200 and $2,600 per year – the president-elect considers tariffs a universal economic and political tool.
He sees tariffs as leverage in negotiations, as a means to protect U.S. industries and as a source of revenue to pay for other initiatives. During the campaign, Trump suggested he would use the additional revenue from new tariffs to lower taxes and pay off debt. At one point he even floated the idea of eliminating income tax and replacing it with tariffs altogether – an idea that economists have quickly dismissed.
Looking at the final budget for fiscal year 2023, existing tariffs generated $80 billion in revenue, a mere drop in the bucket compared to almost $2.2 trillion in individual income tax revenue. Last year, U.S. goods imports amounted to $3.1 trillion. Applying just the simplest math suggests that only a universal tariff of 70 percent would generate enough revenue to replace individual income tax – and that’s just in theory, because imports would obviously crumble in that scenario.
The Tax Foundation estimates that Trump’s actual tariff plans would raise approximately $2 trillion in additional revenue – over the next decade, however. And that is not accounting for dynamic effects, such as retaliatory tariffs from other countries, which would further diminish revenue gains from the proposed tariffs.
You will find more infographics at StatistaSTATISTA on U.S. Trade:
by Felix Richter,
Nov 12, 2024
Economic history has shown that, as an economy develops, so does its service sector. This is certainly true for the United States, one of the most highly developed countries in the world and certainly a service economy. According to the U.S. Bureau of Labor Statistics, service-providing jobs account for more than 70 percent of nonfarm payrolls in the country, while goods-producing jobs account for less than 15 percent of jobs. In the 1940s, both sectors were tied at little above 40 percent, with government jobs accounting for the remainder of jobs.
There are two main reasons for this shift: productivity gains and globalization. As capital and goods began flowing freely across borders, it became cheaper to produce goods in parts of the world with lower labor costs and import them. This is how the United States gradually moved away from producing goods and how China became the world’s manufacturing hub, making anything from smartphones to television sets.
Last year, the United States imported around $3.1 trillion worth of goods, with Mexico, China and Canada accounting for more than 40 percent of that total. Among the top imported goods are cars, pharmaceuticals and all kinds of technology, be it smartphones, computers or semiconductors. Experts have warned that all of these products would likely become significantly more expensive if president-elect Donald Trump went through with his proposed tariff plans.
You will find more infographics at Statistaby Felix Richter,
Nov 12, 2024
During the campaign, one of the central themes of Donald Trump’s economic plans was to raise tariffs. And this time not just on selected countries or products, but across the board. Trump suggested to slap a 10 to 20-percent tariff on all imports and to top it off with a 60-percent tariff on all things coming from China, one of the most important trade partners of the U.S.
According to the U.S. Census Bureau, imports from China amounted to $427 billion last year, trailing only Mexico, which exported $475 billion worth of goods to its northerly neighbor. Raising a 60-percent tariff on Chinese goods would not only hurt U.S. consumers, who would likely end up paying higher prices, but also businesses, who rely on critical inputs from China and would have to re-think their entire supply chain.
You will find more infographics at Statista
A nice little tutorial from Statista on tariffs.
ReplyDeleteI did not realize that our imports from Mexico were greater than from China, and our imports from Canada were slightly less than China. I guess that makes NAFTA important.
Also, the imports from the rest of the world are greater than the imports from the big three.
Unfortunately Americans are mostly economics illiterates. Republicans used to be for free trade, opposing tariffs and trade wars. For good reasons. Now their leader wants both. Many voters said that they are very concerned about inflation, which Biden’s term brought down sharply, after inheriting the inflation generated by the Covid pandemic, including the disruptions to the supply change and the huge stimulus voted on almost equally by both parties. These voters are not only ignorant of the reality that inflation came down rapidly under Biden, but that trumps tariff agenda will increase the prices that they pay for almost everything - inflation will not go away under Trump.it will get worse if he follows through . Mexico and Canada are our biggest trading partners. We import from them but we also export a lot to them because it’s a free trade agreement. Although NAFTA didn’t bring down poverty as much in Mexico as hoped, it did bring many of the people in large parts of the country out of the poorest class and created a middle class that now supports American. companies like Costco, Walmart, etc. and increases demand for all the American brands. It’s no longer only the very rich and the poor. There is now a large middle class in Mexico.
ReplyDeleteThe electronics components manufacturing company I used to work for has several plants in Mexico. They were considered a decent-paying employer for the area they are in, and I think a lot of the people who worked there did get into the middle class. Not sure if the Trump government messes around with NAFTA what that will do to them.
DeleteCorrect me if I’m wrong but don’t tariffs constitute a flat tax or worse? Poor and middle class people have to pay for the increased costs and the difference goes to the government. Musk is richer than I by a factor of tens of thousands but Musk doesn’t eat ten tons of food daily. So it’s really like a negative income tax?
ReplyDeleteWe surely know that the countries we impose tariffs on will retaliate with tariffs of their own. We sell a lot of agricultural products to China, for instance. The people who felt left behind before are not going to feel less so when their markets dry up.
ReplyDeleteGenerally, consumers end up paying higher prices because of tariffs. So yes, tariffs hit poorer people harder than richer people. Katherine has correctly pointed out that sometimes tariffs trigger retaliation.
ReplyDeleteI didn’t realize that Biden didn’t get rid of most of trumps tariffs and actually added some., trump plans to add even more.
Here are a couple of articles that go into detail on the subject.
https://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp#:~:text=Tariffs%20are%20paid%20to%20the,the%20country%20imposing%20the%20tariff.&text=It%20is%20important%20to%20recognize,on%20the%20foreign%20country's%20exports
This article goes into extensive detail if interested in what they say is a 19 minute read.But there are summaries at the beginning.
https://taxfoundation.org/research/all/federal/tariffs/
I have been quacking to anybody who'll listen about the impact that tariffs will have on generic drugs, 80 percent of which are manufactured overseas. My Medicare plan is still not charging co-pays on most generics for 2025 , but if generic prices go up, I expect that will change in 2026.
ReplyDeleteThe US needs to encourage domestic manufacturing of generics to avoid supply disruptions (that became evident during the pandemic when some chemo drugs and widely used drugs like methotrexate were hard to find) and being at the mercy of foreign producers.
"Unfortunately Americans are mostly economics illiterates. "
ReplyDeleteI agree.
The US has been well-served by the thoroughly undemocratic, thoroughly technocratic and thoroughly unaccountable Federal Reserve.
In the recent election, I understand California voters rejected a referendum to raise the minimum wage for certain categories of workers. So maybe there is hope for economic wisdom penetrating the consciousness of the American voting public.
Another bad thing about tariffs, but enormously tempting to a president: as I understand it, a president doesn't need, or doesn't always need, an act of Congress to impose one. He has a lot of unilateral authority to impose tariffs.
ReplyDelete