By michael vivar
Tariffs are a percentage surcharge on imports/exports between countries. Rates typically vary depending on classes of goods such as food and cars.
The intent of the surcharge is to protect economies. It marks up the prices of imports so people choose to buy from the domestic market rather than inexpensive foreign goods.
The US has levied tariffs on overseas steel and produce to protect its industrial and agricultural sectors respectively. "Made in America" prices were kept at a reasonable level.
Throughout each of his presidential terms, Donald Trump has menaced countries with tariffs on almost all imports. This includes from America’s closest allies, Mexico and Canada.
Reciprocal tariffs are retaliatory instruments whereby states slap each other with increasing surcharges. The EU, UK and China have threatened to use them on US goods in response.
The reciprocal tariff made news for the second time in a week. Trump signed an order to match all duties on imports charged by other countries.
This comes after the 25% surcharge he signed on all imported steel and aluminum. Trump alleges that America would see a windfall with these tariffs and it would slow inflation.
What the president leaves out is tariffs on these raw materials are paid by American companies who pass on the cost to customers. This increases end-user prices.
Trump also ignores the globalized economy. Virtually every product sold in the US incorporates some imported raw material. "Buying American" is no longer feasible.
The result of tit-for-tat reciprocal tariffs is a global trade war. As politicians acrimoniously posture, the common citizenry of all countries are bracing for impact.
"What protectionism [tariffs] teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war." - Henry George, American economist