In 2024, many voters turned to Trump, hoping his promises of an economic overhaul would provide the change they so desperately sought. This decision came on the heels of worsening inflation under the Biden administration, which had left Americans grappling with rising prices and shrinking purchasing power. As costs soared, many found themselves financially worse off than when Biden first took office, and the economic strain only seemed to deepen.
While this situation feels overwhelming, it’s not entirely unexpected. The COVID-19 pandemic upended the global economy, causing a temporary halt to spending. With lockdowns in place, people weren’t taking vacations, dining out, or spending money on non-essential goods. Gas prices dropped, rents stabilized, and overall consumer spending slowed to a crawl. The world seemed to freeze, even though it was just for a moment.
As economies reopened, pent-up demand quickly surged. People returned to spending—traveling, dining, and resuming normal life. But this return to spending came at a cost: skyrocketing rent, higher grocery bills, and an inflation rate that refuses to let up.
What’s fueled the frustration isn’t just rising prices—it’s that wages have failed to keep pace. Even as costs climb, many workers haven’t seen significant pay raises to offset the difference. This has left people feeling squeezed, with less purchasing power than before, despite the economy “reopening.” This growing economic frustration is what has led so many to turn to Trump in 2024, hoping for a solution to the inflation crisis and a path to meaningful economic recovery.
What is a Tariff?
A tariff is essentially a tax on imported goods. The goal of a tariff is to make foreign products more expensive, encouraging consumers to purchase locally produced items. Tariffs have been used for centuries by governments to protect local industries, safeguard domestic jobs, and, in some cases, to exert pressure on other countries over trade practices.
A Practical Example of a Tariff: Clothing from China
Let’s look at a practical example: the price of clothing. Suppose the U.S. imposes a tariff on clothing imported from China, one of the largest exporters of affordable apparel to the U.S. With no tariff, American consumers can purchase clothing from China at relatively low prices. However, if a 15% tariff is placed on all clothing imports from China, the prices of those clothes go up.
- Before the tariff: A t-shirt imported from China costs $10 in the U.S.
- After the tariff: That same t-shirt now costs $11.50 due to the 15% tariff.
Consumers are now faced with higher prices for the same clothing they once bought more cheaply. In many cases, they may also have to settle for fewer choices, as domestic options may not offer the same variety or affordability as imported goods from China.
Pros and Cons of Tariffs
Pros:
- Protects Domestic Industries: Tariffs can provide a cushion for U.S. manufacturers, especially in sectors like clothing, by making imported goods more expensive and encouraging consumers to buy locally-produced products. This helps preserve jobs in industries that might otherwise struggle to compete with cheaper foreign imports.
- Encourages Investment in U.S. Production: With foreign goods becoming more expensive, U.S. companies may be incentivized to invest in domestic manufacturing. Over time, this could create jobs, foster innovation, and lead to a more self-sufficient economy.
Cons:
- Increases Costs for Consumers: The immediate effect of tariffs is an increase in the price of imported goods. This strains American consumers, especially those who rely on affordable imports like clothing, electronics, and household goods. As prices rise, purchasing power decreases, making it harder for families to afford the same goods.
- Limits Product Variety: Tariffs can reduce the range of products available to consumers, as foreign goods become more expensive and less competitive. This is particularly evident in industries like fashion or technology, where imports often offer a broader selection of products at competitive prices.
What Could Imposing Tariffs on China Mean for the United States?
Imposing tariffs on China could have unintended consequences for the U.S. economy, even if the goal is to address trade imbalances or unfair practices. Here’s why:
- Higher Prices for Consumers: As seen with clothing, tariffs increase the cost of imported products. U.S. companies often pass these costs on to consumers, leading to higher prices for everyday goods like electronics, clothing, and appliances. This hits lower-income households the hardest, as they are more sensitive to price hikes.
- Impact on U.S. Businesses: Many U.S. companies rely on cheap imported materials to keep production costs low. A tariff on Chinese goods could drive up costs for these businesses, forcing them to either raise prices or reduce profit margins. In some cases, companies might cut jobs or relocate manufacturing to lower-cost countries, ultimately reducing the competitiveness of U.S. businesses.
- Retaliation and Trade Wars: Tariffs often provoke retaliation. If China responds by imposing tariffs on U.S. products like soybeans, cars, or agricultural goods, American exporters could lose access to crucial markets. This tit-for-tat escalation can lead to a full-blown trade war, which disrupts global trade and destabilizes international markets.
- Supply Chain Disruptions: The global supply chain is interconnected, and many U.S. businesses depend on Chinese manufacturers for components that go into everything from electronics to automobiles. A tariff raises the cost of these essential goods, potentially causing delays in production, reducing profits, and harming small and medium-sized businesses that rely on affordable imports.
- Job Losses in Certain Sectors: While some industries might benefit from tariffs—like domestic manufacturers trying to compete with cheaper imports—other industries could suffer. Retailers, technology companies, and industries that depend on foreign raw materials may face higher operating costs, leading to layoffs or hiring freezes.
- Long-Term Economic Growth: Over time, tariffs could hinder economic growth by increasing the cost of doing business. While some sectors might see short-term benefits, tariffs distort market forces and reduce overall economic efficiency. This could stunt innovation, raise prices, and ultimately limit economic expansion.
In Summary: The Short-Term Gain, Long-Term Pain?
In the short term, imposing tariffs on China may seem like a way to address trade imbalances and bring jobs back to the U.S. We might see some positive effects in specific industries, especially those that can directly compete with foreign imports. However, the longer-term consequences could be more damaging. Consumers will face higher prices, fewer product choices, and a potential slowdown in innovation.
While inflation under the Biden administration has been a major issue, the inflationary impact of tariffs could rival or even surpass those effects over time. By making goods more expensive and disrupting global supply chains, tariffs could increase the cost of living for Americans, worsening the very economic pain that voters hoped Trump would resolve.
The challenge is clear: While tariffs might bring some immediate relief to certain industries, the broader economic cost on consumers and businesses could ultimately undermine the recovery we need.
