Guess what, we at war with China, Mexico, and possibly India. Not a hot war, or even a cold war, but a trade war. And the main weapon on this type of war are tariffs, but what the heck are tariffs. A tariff is when one government imposes a tax on a good or service imported from another country. Sometimes countries do this to “bring back industry to the home nation” and sometimes it’s to retaliate against a country doing something they deem wrong. However, it’s not the country’s government themselves that pay the tariffs, but the companies that import the products.
Since a tariff is a pure tax, one of the most obvious disadvantages of tariffs is that is will rise the cost to produce goods rise. Although companies will take some of the loss to this rise in cost, most of the force will hit the consumers. This makes lives of every single person affected by the tariffs worse. People have noticed that smartphones have recently began becoming really pricey. How can a object with around the same specs as previous phones cost $1000? This is because that phone probably comes from China and companies like Apple are preparing for the supply chain to become completely screwed up by the tariffs. The effect is worse for products that require far reaching supply chains. For example, the proposed Mexican tariffs will really screw with automakers and their consumers. This is because the assembly of a car takes place in many places. A Lot of those places lie in Mexico. Which basically means that the car is passing the border many times, and with the tariffs the cost to produce a car will skyrocket. You think buying a car now is expensive, just wait.
This does not only affect one times buys, like phones and cars, but also small but important things like food. America gets a lot of it’s tomatoes and almost all of its avocados from Mexico. With the tariffs, alot less people will be able to afford to enjoy some avocado toast with tomato juice on the side. However, this trade war goes both ways. Chinese attacked American companies with tariffs and it can cause some bad effects. Americans love their bacon and their pork, but have you noticed that not many stores sell pigs feet or pig liver. That is because Americans don’t have a taste for them, however China does. But with the Chinese raising the cost to bring those products over to China it makes it less appealing to buy these products.
People forget that America is not the only marketplace. Corporations that do business internationally have to keep that fact into consideration when making decisions. That’s why in some cases work is being shipped overseas in order to get around such tariffs. For example, electrics cars. Believe it or not electrics cars are booming in China, it is a way bigger thing that here in the states. But with this tariff war, it is harder to get the parts to make the cars in the United States and it is harder to sell the cars in China. That’s why the electric car company, Tesla, decided to build a factory inside China to get around the tariffs. Many other companies, like Harley Davidson, have followed in these footsteps.
Another thing is that the recent tariffs are setting a dangerous precedent. The first tariff was somewhat understandable, an economic problem requires an economic solution. However, in Mexico, where we are using a economic solution to deal with a Immigration problem makes no sense. Future world leaders could see tariffs as the ultimate card to deal with their foreign issues, which can put the world economy into ruins.
Tariffs are the enemy to free trade. While free trade allows the market place to decide where things go and it’s up to business to decide what to do. Tariffs force the hands of businesses and usually at high cost to the business and their customers. By the way, last time we did this many tariffs, the Great Depression got worse (just saying).
Debate Central. 