WASHINGTON (AP) — In an effort to revamp the United States economy, Donald Trump has been backing a policy that will introduce huge new tariffs on foreign goods entering the country. Tariffs are essentially taxes on imports and exports. They can be applied on certain products or all goods entering the country. Trump and his supporters see tariffs as an effective measure for boosting the economy and correcting trade imbalances. Critics, on the other hand, warn that this policy could lead to higher prices for consumers, which could eventually affect inflation and US companies competing in the global market.
The core goal of the tariffs is to shield domestic businesses from foreign competition and make it easier for US corporations to grow their sales. Tariffs force foreign companies to match the prices of US producers, promoting jobs and economic growth within the country. However, based on historical analysis, imposing large-scale tariffs on goods entering the US might have some unintended consequences. Companies facing these additional taxes usually pass them on to the consumers by increasing product prices.
Impact of the Tariff System
Some goods like food and auto sales have already experienced huge tariffs imposed by other countries such as China and Canada. Some would say these imposed taxes forced food producers in the United States to dramatically change their exports strategies. For instance, In response to China imposing tariffs on 800 U.S. products worth 3 billion in 2018, US farmers witnessed decreased profits, with soybean growers being particularly hit hard.
Job Loss and Supply Disruptions
Higher prices of imported goods do, in fact, decrease demand. When demand decreases, it can affect American companies doing business abroad. Not only this, companies relying on exports might lay off employees to reduce costs. As there is a need to have quality control and handle distribution, supplies need to be imported from other countries for American companies. Tariffs increase the cost of production for companies. As a result, companies close down, and industries that rely on imports often experience disruptions in supply chains and logistics.
Tariffs on Emerging Industries
The overall impact of tariffs is seen when evaluating the overall state of emerging industries with great potential. Key examples of the current budding industries would include Solar manufacturers, biotechnology, and the like. In the case of Solar panel manufacturers, their Chinese competitors have an edge due to more widely available resources in China, leading to decreased prices for Solar Panel produce and favorable position in the US market.