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Word of the Day: Tariffs

July 1, 2024 | Commentary

  • The use of tariffs and other trade restrictions as geopolitical and revenue tools has existed since well before the founding of this country.  In the last eight years their use has grown and in this election season the rhetoric from both sides is to expand them further.
  • The rationale for tariffs includes additional revenue for the government, protection of domestic jobs and greater national security.  Each of these justifications has serious flaws when considered in the total picture of world trade.
  • Tariffs are a tax, which generally gets passed on to the consumer. Increasing tariffs work against the goal of reducing inflation.
  • In total, significant changes in tariffs have very little impact on the sources of government revenue, which predominantly fall on the shoulders of individuals through income, Social Security and Medicare taxes.
  • After 2024 there will likely be an intensification of trade restrictions regardless of the election’s outcome.  When the mutually destructive nature of a trade war becomes evident and creates a political liability, negotiations are then pursued to ease the tension.  The economic disruption and losses along the way are, however, entirely avoidable.

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