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Tariffs and Trade Wars: What the Average American Needs to Know

Recent news stories have been dominated by talk about tariffs and trade wars and there’s no doubt that the economics are complex. This issue hits close to home for us – tariffs have a direct effect on All American Clothing and many of the people and businesses we work with.

Debating the pros and cons of the new tariffs levied on steel and aluminum imports, as well as potentially Chinese technology products, isn’t the goal of this blog. Putting politics aside, here’s what the average American needs to know about tariffs and how it could affect them:

What are tariffs?

A tariff is a tax on goods imported into a country. This tax is a percentage of the total cost of the product (includes insurance, freight, etc.). A tariff raises the price of the imported goods.

Which countries charge tariffs?

All countries levy tariffs, but on different goods and products depending on which domestic industries a country wants to protect from global competition.

Tariffs are waived when countries form free trade agreements with each other. Businesses use trade agreements as market strategies – they target exports to countries their own country has favorable trade agreements with to minimize cost.

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What are the pros of tariffs?

When tariffs are applied to a foreign product, the result is the product becomes more expensive and gives a leg up to domestic makers because they don’t have to pay the tax. The theory is this will protect and support domestic industries in an effort to increase the demand for their products, which drives their business and creates new jobs.

In some cases, this is a strategy governments use to revitalize industries that are struggling. In others, it’s a strategy to protect a country’s most valuable industries.

What are the cons of tariffs?

Opponents say tariffs often result in “tit for tat” trade wars. When a country is hit with a tariff, it may hit back with tariffs of its own. The cost of tariffed products goes up and companies either have to absorb that increased cost or pass it on to consumers. The fear is that this will distort trade and create products that are too expensive for consumers, decreasing demand and causing job loss on both sides.

Another concern revolves around whether domestic industries can meet the increases in demand if the tariffs accomplish their goal and funnel business to domestic makers.

What does this mean for American consumers?

The average American will likely see both increases and decreases in the cost of products – it simply depends on which products they are buying. It’s unknown and debatable whether the increased costs will be minimal or significant.

For example, the recent steel and aluminum tariffs could raise the prices of everything from automobiles to canned goods because U.S. makers depend on imported steel and aluminum. But the increased demand for domestic steel and aluminum could create more job opportunities and higher wages for workers in those industries in the U.S.

What does this mean for American manufacturers?

U.S. manufacturers must evaluate how tariffs will impact their supply chains and materials sourcing. For bigger manufacturers with global supply chains who depend on competitive pricing to manufacture their goods, tariffs will increase costs. For domestic producers of tariffed products, like the American steel industry, the recent tariffs are nothing but positive news as they signal an increase in demand.

Arguments for and against tariffs abound, and the forces of supply and demand are shifting in the U.S. and abroad. What do you think about the new proposed tariffs and the effects it will have?

11 thoughts on “Tariffs and Trade Wars: What the Average American Needs to Know

  1. Tariffs will increase the cost of goods sold in the U.S. It will also increase the income of U.S. workers. When the U.S. workers have more money to spend, the increase cost of goods will be affordable. I am happy to spend more money for U.S. made products when I have that option knowing I am helping people in this country make a decent living. I only wish I had more U.S. made options!

    1. will also increase the income of U.S. workers. When the U.S. workers have more money to spend, the increase cost of goods will be affordable.
      I try to buy EVERYTHING I can find that’s made HERE also.
      But I can’t agree with Your statement above about Us having more $’s.
      Maybe a LOT later. But not as quick as You or I would want it to be. That’s something that “Could happen” a long time down the road.

  2. Tarriffs work best when imposed on finished goods. Not raw materials. America no longer has the steel mills it once had. That went to Japan and then China over the last 50 years. So it’s not like tarriffs on steel help America because America is no longer competitive in that area. The idea is good but it is too little too late. A new car may cost more because the gov’t gets additional revenue from the steel STILL bought from China. Well, I guess Congress needed some way to offset the revenue loss caused by giving tax breaks to the rich. But it helps the middle class not one iota. And actually, if you make the raw materials cost more in the US, Ford and GM are just going to move more of the cars they make to China.

    1. so rebuild the steel mills to be more efficient! My late husband’s people are from PGH and Youngstown. We already poisoned that area so rebuilding on brownfields will not add to pollution. I live in Harrisburg, up the road from Steelton. All the guys that used to work at the steel mill bought Harleys.. redistribution of the wealth. The iron ore came from Canada and the boats on the Great Lakes carried it to Penna. via Lake Erie and locks operated by Union Workers. Buy your food locally or at least from the USA and we will be a little better off. &&& I remember when Carhartt was American Made, it was still expensive! Semper Fi

  3. The price increase of imported steel will raise the cost of an American-made automobile by $ 100 – $ 150. Against the cost of a $ 25,000 car? Less than one per cent; really? Regarding clothing, the difference between a pair of imported Carhartt jeans and similar pair to made by All American Clothing is already negligible, so the tariff would make the Carhartts more expensive. To maintain the price similarity, Carhartt would have to cut into its obscene profits. Wah! Maybe that would cause them and others to return production to the U.S. The tariffs may hurt some industries, but would benefit many more.

  4. Carhartt, Fruit of the Loom, Levi, no longer made in US, no longer a reason to purchase. I quit Wall-Mart in the 90’s because of this (non USA). My replacements (working on a list): USOAA socks, Bayside Pocket “T”, Campbell Co.briefs. more to come. Wall street and NO enforcement of trade agreements is killing US manufacturing. and soon retailers( Can you say SEARS). I wrote Fruit of the Loom, their reply “we no longer manufacture in the US”. I wrote Wrangler, their reply “Thank you, and here are model #s) They are on my next purchase list. Thank You “All American”

  5. I needed tires for My car. I called 3-4 places asking “Do You have anything that is made in America. Not ONE person could tell Me whether they had anything made here.
    The Goodyear Guy even said that He wouldn’t know until the tires actually came off the delivery truck.
    I finally found some Cooper Tires that are made here. And Honestly, I don’t really care if it’s more expensive. I can’t lay down and sleep if I willingly go buy something and not look and TRY to get American Made.
    GOD BLESS US ALL

  6. I am old enough to remember the original arguements for the NAFTA and WTO membership for China.

    1. If we build some factories south of the border, the people there will stay there. How long does it take to admit failure ? Ross Perot was excoriated for saying that large sucking sound you hear is the sound of your jobs sucked south.

    2. If we bring China into the “community of nations “ over time they will evolve into a more open society. How long does it take to admit failure ? The guy who runs the place now is the new Mao, emperor for life of a society that grades peepul for their “social credits “. http://fortune.com/2016/11/29/china-social-control-credit-rating/
    But in the mean time the US Government gave them the keys to our prosperity, and a few others besides.

    How many perfessers of economics had their job sent over seas ? Do you think their arguement would be the same ?

    1. One of the last things we have that the world wants is our education. When universities and colleges overseas become competitive or even better than let’s say Yale or Princeton then what will the good “perfessors” have to say about exporting jobs especially when their $150 k jobs turn into $50 k jobs in India. ha

  7. Agree with all of the above. Also: there are ways to protect and advance American industry and workers other than tariffs – investment in education, infrastructure, research; regulation of finance. We spent a lot of money on developing the interstate system and that created a lot of jobs, how about high speed rail, mass transit. What about government subsidized housing as happened after World War II.

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