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What is a tariff?Why do countries use them

Trump’s Tariffs Are Siphoning $35 Billion From Consumers and Corporations

President Trump likes to say that China and other countries are pouring money into the U.S. with the tariffs he has imposed. However, the countries that are sending goods to us aren’t paying the tariffs . The companies that import goods are paying them , which means U.S. companies need to raise prices (therefore a tax on consumers), lower their margins and have less profit (which also lowers the amount of taxes they pay to the government) or even go out of business.

Custom duties almost doubled in the December quarter

The U.S. Treasury Department releases a monthly report, which provides how much in customs duties are received by the government (December’s is delayed due to the shutdown. So, I have estimated that month’s result). Trump is correct that the payments have escalated in recent months. While they took a jump in the second half of fiscal 2018 (September) from the first half, they have almost doubled in the December quarter compared to the first half of fiscal 2018 before the additional tariffs were imposed.

  • First half of fiscal 2018: $3.1 billion per month
  • Second half of fiscal 2018: $3.8 billion per month
  • First quarter of fiscal 2019: $6.0 billion per month
    • Increase of 95% from the first half
  • Delta between $6.0 and $3.1 billion is $2.9 billion

The $2.9 billion monthly increase in customs duties over a full year is $35 billion, which is either passed on to consumers in higher prices or eats into company profits. This can potentially drive a company out of business such as a South Carolina TV manufacturer laying off 126 employees or a Missouri nail manufacturer laying off 200 of its 500 employees. While products from China aren’t the only ones being taxed at a higher rate, it is the most visible country being hit by them.

Trump doesn’t understand the benefits of trade-What is a tariff?Why do countries use them

Trump’s view of trade is that if you run a deficit you are losing or a sucker. This isn’t correct. American’s have benefited by being able to buy lower priced goods or products that would not have been available if they weren’t built in China.

When Trump says Apple should build iPhones in the U.S. he either doesn’t understand or chooses to ignore that there aren’t hundreds of thousands of people who would be willing to do the tedious work that is required. Along with the U.S. not having the workforce, there is an entire supply chain for manufacturing and distributing not just iPhones but almost all the other products that are built in China for the U.S. And even if they could be built here, the iPhone’s price would be even higher than it is today.

China has engaged in unfair trade practices and outright theft

Trump is correct that China has engaged in forcing technology transfer from U.S. to Chinese companies to gain access to its markets and Intellectual Property theft. This has had a huge impact on various U.S. manufacturing industries and therefore jobs.

A key question is; are U.S. customers willing to pay higher prices for goods made in the U.S? At times they are, but overall, they have “voted” with their pocketbooks for lower priced goods.


  1. What is a tariff? Why do countries use them?
  2. According to the article, who is paying for these tariffs? What is President Trump’s argument that China is paying for them?
  3. Why does the article say, “Trump doesn’t understand the benefits of trade?”
  4. Why are most of the tariffs imposed by the US aimed at China?