Marc Levinson

Tag: Tariffs

  • The Government’s Tariff Bill

    U.S. tariffs supposedly generated a record $31 billion in revenue during the month of August. According to a breathless report from Fox News, “The US could collect as much tariff revenue in just four months to five months as it did over the entire previous year.” But while those numbers may prove accurate, they represent only one side of the federal government’s ledger. There’s hasn’t been much attention to the fact that with the tariffs Washington is effectively taxing itself.

    President Trump has set a tariff rate of 50% on steel, copper, and aluminum imports from most countries, excluding Great Britain. He has also imposed a 50% rate on the steel or aluminum content in 407 different products, from truck trailers to barbecue forks with wood handles. Those tariffs don’t just affect imports. By making foreign products more expensive, they make it easier for domestic producers to jack up prices; were that not the case, the tariffs would serve no purpose.

    And who buys that domestic metal? Much of it ends up in goods purchased by Uncle Sam (fighter planes, postal delivery trucks) or by state and local governments using federal as well as state money (girders for highway bridges, pipes for water systems). With the tariffs in effect, governments buy less with each dollar they spend on such things.

    Steep tariffs on pharmaceuticals are supposedly impending. The United States and the European Union have agreed that European drugs will face a 15% U.S. tariff, and Trump has threatened tariffs of up to 250% on drugs from other countries. Since the Washington pays 59% of the cost of outpatient prescription drugs and the states pay another 5% to 10%, governments will bear most of the burden of higher prices.

    These tariffs are not affected by the recent court decision blocking many of the tariffs Trump has proposed. They could remain in place indefinitely. And as long as they do, U.S. taxpayers will pay far more than they should for the goods their tax dollars buy.

  • Dominance

    Donald Trump is into dominance. In a series of orders since he started his second term last January, he has proclaimed his intention to restore America’s maritime dominance and its energy dominance, to make the United States dominant in cryptocurrency and artificial intelligence, and to maintain the dollar as the world’s dominant currency. And that’s not all. “America’s destiny is to dominate every industry,” he told an audience in Pennsylvania on July 15.

    In recent days, Trump reasserted his belief in U.S. dominance by announcing steep tariffs on many countries. His quest for dominance goes beyond eliminating bilateral trade deficits. He has placed tariffs on imports from Canada, supposedly because it allows fentanyl to cross the border into the United States; and on Brazil (with which the United States has a trade surplus) to punish it for prosecuting a former president for plotting the violent overthrow of the government; and on India, supposedly because it purchases oil and military equipment from Russia. Tariffs, he clearly believes, are a useful cudgel to force other governments to conform to his desires.

    In the short term, large bilateral trade deficits have made it difficult for trading partners to retaliate when Trump nullifies longstanding trade agreements and announces new import barriers. In the longer term, though, such policies threaten the United States’ central place in the world economy. U.S. disinterest in expanding international trade and negotiating multilateral agreements is not shared by most other countries, which are busily signing trade packs that do not include the United States. Talk about creating a substitute for the World Trade Organization without U.S. involvement is widespread.

    Already, traders are responding to America’s anti-trade agenda by finding other partners. “Since this March, China-ASEAN export volumes are now double that of China-US, traditionally the most important route in container shipping,” Bloomberg reports. On August 5, the Bureau of Economic Analysis confirmed that while U.S. imports are declining, its exports are in decline as well. As America withdraws, other countries are moving forward, and U.S. dominance is slowly falling away.