President-Elect Trump’s proposed tariffs could increase consumer prices, economists warn
WILMINGTON, NC (WWAY) — President-elect Donald Trump continuing to affirm that he will impose tariffs on foreign goods during his second administration.
Trump has proposed a 10-20% tariff on all foreign imports and a 60% tariff on all imports from China. A tariff is a tax on imports that is paid by the company importing goods.
The idea of imposing tariffs is that they will force companies to manufacture in the US but many economists—like UNCW Instructor Dr. Mouhcine Guettabi—say they are ineffective on that front.
“It’s still going to raise the prices and the person who’s going to be paying those prices is us, the consumers. It’s not going to be the Chinese company or the Taiwanese company, or wherever,” Guettabi said.
Paradoxically, Guetabbi says tariffs can actually make it harder for companies to manufacture in the US by increasing costs.
“If you levy tariffs on a bunch of things that these US companies are buying, then that raises the costs of US companies themselves, which means the types of things they make, even though they’re made within the country, those prices are going to rise as well,” Guettabi explained.
Guettabi adds tariffs can also encourage other countries to impose tariffs on American exports, which can make foreign companies reluctant to purchase from the US markets.
So why have tariffs become a popular talking point?
Erica York is a senior economist and research director at the Tax Foundation, a DC-based think tank focused on tax policy. York says tariffs offer a politically expedient way to gain support.
“Tariffs let politicians create a very clear story and a very clear enemy of who they are targeting with the policy, even though that story doesn’t line up with economic reality,” York explained.
While encouraging manufacturing in the US has been a talking point for both sides of the aisle, York says tariffs won’t solve the issue.
“We need to be looking at broader reforms to the business tax system, look at how we treat business investment in the tax code, look at broader regulatory barriers to doing business in the US, look at labor issues. All of these are much more fruitful areas for reform than imposing taxes on imports.”