A Bit About Tariffs

By Andy Kober

Tariffs have been much in the news lately and as with many things social media is loaded with experts – or so they think.
Unfortunately, as so often happens, the truth is lost in opinion, opinion-led reporting, or actual fake news instead of legitimate research.
The first question is: what is a tariff? The simple answer defines a tariff as a tax placed on imported products. This tax largely serves to protect domestic industries from being undermined by foreign products produced and sold at cheaper costs. Cheaper costs can be achieved by a variety of factors such as lower prices of raw materials, cheaper labor costs, lower tax rates, and less costly regulations on businesses.
For example, in Country A the price of a pair of jeans is driven by corporate taxes paid to federal, state and local governments, regulations, insurance, and labor – among other costs. In Country B, those same jeans are produced with considerable less taxation, little to no insurance requirements or regulations, and extraordinarily low labor rates – often sweat shops. Country B sells those cheaply made products in Country A, which ultimately forces businesses in Country A to close because they cannot compete. To product their businesses, Country A taxes items imported from Country B in an effort to create a financially level playing field.
While it sounds simply, it often is not.
Using the same example, the citizens of Country B cannot afford to purchase products made in Country A because their income is so low. Then there are cases where Country B adds tariffs that increase the cost of Country A’s products even higher. The result is Country A’s markets are flooded with Country B’s cheap products while Country A’s businesses cannot sell in Country B because the products are not affordable.
And yes, instead of being used to solely protect domestic production, tariffs have been weaponized – sort of an economic war – as businesses in Country B floods Country A with cheap made products, and Country A’s businesses collapse.
NOW, go look at your clothes – specifically where they are made. You are unlikely to find any with a Made in America label. You will find China, Vietnam, Bangladesh, and a host of other countries. And not just clothes. It is extraordinarily difficult to find anything with a Made in American label anymore. Even many prescription medications are being imported.
Why is this? It is at least partly due to the ongoing flood of imported products made cheaper that have driven American companies out of business.
There is more to say regarding tariffs, both the positive and negative impacts, but suffice it to say that for many years America has been on the wrong end of tariffs, with American products being subject to much higher tariffs than other countries — not in every case, but in too many cases.
TARIFFS were not the cause of the Great Depression.
Social media experts, fed by fake news outlets, have been using scare tactics to suggest that increasing tariffs on imported products caused the Great Depression. That is simply untrue as there were many factors that led to the Great Depression – including debt issues, financial over-extension, speculative trading and buying of stocks, over-supply of goods and products that drove prices down, collapse of the banking system, and other issues.
Tariffs are not something new, just something that is now in the news and hotly debated every day by those who know little to nothing about them.
That’s my opinion.
Andy Kober can be reached at andykober@hotmail.com