by Spencer P. Morrison
Tariffs won’t break the bank—history shows prices stay steady, and buying American is always an option. The media’s panic over Trump’s tariffs is just another round of misplaced hysteria.
President Trump has imposed 10 percent tariffs on imports from China. Predictably, the media’s chicken littles shrieked that the sky was falling. Tariffs will raise prices! Not only that but the poor will be hardest hit! Just think of the children!
These arguments are easily dismissed as appeals to emotion—they are rhetorical flourishes, devoid of truth and meaning. In reality, both history and logic prove that tariffs will not increase prices in the long run. Rest easy: the sky remains high above your head.
The Time Traveler
Every time President Trump threatens to raise tariffs, the media clucks that American consumers will pay the price. This did not happen last time, and it is unlikely to happen now. Consider the great washing machine debacle of 2018.
In January of 2018, President Trump announced that he would impose a 40 percent tariff on imported washing machines. On top of this, he also imposed additional duties on imported steel and aluminum—lightning occasionally strikes twice.
At the time, liberals lost their collective minds. They lamented that low-income Americans would not be able to afford washing machines. They pontificated that we would be living in a nation of grungy, soiled masses—living caricatures of Pig-Pen from the Peanut’s gang.
Of course, that never happened.
The price of washing machines did not change appreciably over the next few years. This is obvious when looking at the Consumer Price Index (“CPI”). The CPI tracks the prices of over 80,000 consumer goods and services in cities across America. They do this every month. How? They contact stores and obtain actual sale prices.
What did the CPI have to say about the price of washing machines in the aftermath of President Trump’s insidious wave of tariffs? Not much.
In 2018, the price of laundry equipment increased by 6.8 percent, compared to an overall inflation rate of 2.44 percent. In 2019 to date, the price of laundry equipment decreased by 0.48 percent, compared to an expected inflation rate of 2 percent.
Also, consider for a moment that in 2012 the price of laundry equipment increased by 8.56 percent. Tariffs were clearly not to blame for that increase. Further, prices of just about every consumer product increased under President Biden, who roundly rejected tariffs as a matter of principle. Accordingly, it is entirely possible that Trump’s tariffs had no effect on laundry equipment price whatsoever—this may be yet another example of a random walk confusing the Chicken Littles that run our media.
Tariffs For Dummies
The reason that President Trump’s tariffs did not have much (if any) observable effect on consumer prices during his first term—and the reason that they are unlikely to have any effect on consumer prices this time around—is because tariffs are not applied to a product’s retail price, wholesale price, or import price. Instead, tariffs are levied on the first sale price—the price paid to foreign vendors by American companies or their middlemen.
This method of calculation reduces the tax burden on American consumers but preserves the tariff’s punitive effect on foreign producers. For example, suppose President Trump was to impose a 10 percent tariff on Chinese washing machines.
Imagine you take a trip to Home Depot. You notice that the average imported washing machine costs $500.00. That is the product’s retail price. Will a 10 percent tariff raise the cost of this washing machine to $550.00? No. Tariffs are not charged on the retail price. Let us journey back a step further.
American retailers often do not buy products directly from Chinese manufacturers. This is because China imposes an intentionally convoluted regulatory framework on foreign businesses, which is designed to benefit Chinese bigwigs. In any case, Americans often buy products through middlemen located in Hong Kong, Singapore, or Taiwan. These middlemen buy cheap Chinese goods—in this case, washing machines—and sell them at a profit. Typically, this is a small fraction of the retail price. In our example, we will assume they sell for $150.00.
Of course, the middlemen do not work for free; they buy washing machines from Chinese factories for $70.00. This would be the first sale price upon which tariffs are calculated. In our example, a hypothetical 10 percent tariff on Chinese washing machines that retail for $500.00 would work out to just $7.00—a fraction of the $50.00 the media would have you believe.
Of course, we do not import whole washing machines from China, but we do import many of the parts. The logic applies not just to the finished product but also to the component pieces. For added clarity, in this example, the actual prices were based on real-world prices for toasters, although the actual margins will be product-specific.
Finally—and I cannot emphasize this point enough—you can avoid paying tariffs entirely by buying American. As such, there is no reason to oppose tariffs unless you want to buy “cheap” Chinese junk. Why would anyone want to do that?
China is our greatest economic rival. Can you imagine American journalists griping that they couldn’t buy the latest gizmo from the U.S.S.R. at the height of the Cold War? Certainly not. So why the hysteria over tariffs today?
President Trump’s tariffs will level the economic playing field and will help reshore American industry. Tariffs give us options. The rest is up to us to buy American.
Spencer P. Morrison
Source: https://amgreatness.com/2025/02/25/no-trumps-tariffs-will-not-cause-inflation/
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