Let's Chat About Tariffs: A Simple Guide
Import Duties Explained: Nature, Function, and Recipients of Taxes on Goods Imported
Tariffs are taxes on goodies and services imported from other countries. They're like roadblocks for trade, designed to give an edge to local businesses against cheaper foreign competition. One dude who thinks they're awesome is Shawn Fain, baby, President of the U.A.W. (You can find the whole scoop in an article I penned on March 10: "UAW President Shawn Fain Backs Trump's Tariffs. Here's Why").
What's wild, though, is they're also called duties. If you've ever flown back to the USA from a trip to Canada and had the option to cop stuff "duty-free," then you know what I'm talkin' about – no tax (tariffs) for you!
So, How Do These Tariff Things Work?
Tariffs can be slapped on all imports from a specific country or specific items. Here's where things get tricky: they can protect local businesses, help the importing country rake in cash, and maybe even boost GDP. But, when they get hiked, they could cause recessions as consumers cut back on spending. Additionally, U.S. companies may have to look elsewhere for components if they're too expensive, hiking manufacturing costs.
Now, things get even stickier when you consider that plenty of U.S. companies rely on foreign-made components for manufacturing. If the U.S. slaps high tariffs on those components, well, the company's bill goes straight up. To save some cash, they might hunt for these components stateside – but to do that, the quality's gotta be top-notch and the price gotta be right. Guess what? It ain't always easy to find both!
A Little Bit of History
In the grand scheme of things, tariffs are old school. Originally, they were the only way the feds made bank – 'til the income tax showed up in 1913 with the 16th Amendment. But even with the income tax around, tariffs still played a massive role in the U.S. economy for a hot minute!
Today, trade ain't the biggest piece of the pie. Check this: in 2023, the U.S. economy was made up of consumer spending (68%), business spending (18%), government spending (17%), and net exports (–3%). That's right, y'all. Trade's just a fraction of the pic!
Hitting the Books: A Look at U.S. Trade Balance, 1947-Present
Here's a breakdown: the U.S. has had a trade deficit for about 90 percent of the years since 1947. Those numbers get a little wacky in more recent years – and it's a big reason why folks are harping on tariffs these days.
Tariffs affect your wallet too, since they can hike up costs for the products you buy. Good news though: sometimes, companies absorb the cost. In 2020, General Motors announced it would take a hit of $4-5 billion in tariffs for imports. But, if a company ain't making bank or just going for broke, they might pass the buck to you.
So yeah, tariffs are a hot topic. They might affect your pocketbook, businesses, and even foreign policy. Wanna learn more 'bout 'em? Take a gander at "Trump's Tariffs Loom. There's More To It Than Most Understand," "Trump's Tariffs and Inflation - Who Pays?," or "Trump's Tariffs: What Every American Should Know." Stay woke, folks!
The Long and Winding Road: Tariff History in the U.S.
Since its foundation, the U.S. has tangoed with tariffs. Back in the day, tariffs were the main source of revenue for the feds. But here's the deal: trade ain't the main attraction in the U.S. economy, as it only accounts for a small percentage of the GDP. But if a trade surplus is achieved by boosting exports, it can positively impact the GDP.
In the whirlwind of trade over the past 78 years (since 1947), the U.S. has had a trade surplus in about ⅓ of the quarters. The deficits have worsened in recent decades, which has played a role in the recent push for tariffs and new trade deals. Whoa, took a wild trip down memory lane, didn't we?
- Shawn Fain, the U.A.W President, supports Trump's tariffs, as stated in an article from March 10 titled, "UAW President Shawn Fain Backs Trump's Tariffs. Here's Why".
- Tariffs can be a financial tool that helps a country's economy, such as by providing a trade surplus, but they can also lead to a trade deficit and cause recessions if they are too high, due to consumers cutting back on spending.
- To track the impact of tariffs over time, you can refer to a graph or chart, like the one I used in "Trump's Tariffs Loom. There's More To It Than Most Understand".
- In today's economy, trade only makes up a fraction of the GDP, with consumer spending taking up 68% and business spending taking up 18%. However, tariffs can impact businesses, especially those relying on foreign-made components, since an increase in tariffs on those components can raise manufacturing costs.