This article discusses the growing popularity in tariffs.
Originally, these tariffs were considered stomach taxes because tariffs
affected imported goods that made products like bread. These tariffs increased
the price; the rich didn’t feel this price as significantly as the poor thus
dubbing these tariffs as poor tax or “stomach tax”. Taxing products coming in,
is protectionist. It protects products made within the US, but taxes what once
were cheaper foreign made goods. This article argues that protectionist
policies will not help rebuild American manufacturing jobs; in fact the
protectionist policies will greatly affect consumers. Partially, because
consumers are not aware of how many purchased goods are imported. The impact of
tariffs on just China and Mexico “would hit poor Americans the hardest: A
tariff of 45% on imports from China and Japan and 35% on Mexican imports would
cost US households in the lowest 10% of income up to 18% of their (mean)
after-tax income or $4,670 over 5 years.” A worldwide tariff would “[cost] households in
the lowest decile 53% of their annual income, while it would cost households in
the highest decile 7% of their incomes”. Protectionist policies have a much
wider affect than previously thought. This article does not even cover the
potential affect our protectionist policies would have on the American
international trade relationships. It seems unlikely that normal trading
partners won’t create their own tariffs against American exported goods,
creating a more negative impact on US manufacturing.
Link: http://www.economist.com/blogs/buttonwood/2017/01/taxing-poor
2 comments:
This is a great example of the consequences of lack of information in the market: its lack of access to the lay on the commonly consumed imported goods will hit them back hard and unexpectedly, causing to major economic losses.
Such tariffs will bring about more harm than good: even though it will encourage the domestic production of goods, it will demotivate foreign powers to export to the US, it could probably isolate the country in terms of world trade given Trump's order to abandon the TTP and the implications with the possible repeal/reform of NAFTA, and possibly bring about harmful changes in the value of the American currency.
While it seems likely that other countries will impose tariffs on US goods, it will be interesting to see if any US-based companies with foreign factories will move jobs back to the US, or if the tariffs on US exports will make it a lost cause. If that's the case, it seems foolish to impose these tariffs on foreign imports.
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