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One of the perverse things about Trump's tariff taxes appears to be that it, in some cases, they will make American-made goods *more expensive* than imported ones.
How so?
Imagine this.
There are two identical products that sell for $100.
One is manufactured in Australia, one is manufactured in the US.
For both products, there's $75 worth of parts and components made in China.
The Australian-made product is hit with a 10% tariff tax. That's $10. So it would retail in the US for $110.
The $75 worth of Chinese-made parts in the American-made product are hit with a 34% tariff tax. That's $25.50. So it would retail in the US for $125.50.
So if I'm not mistaken, it works out $12.50 cheaper to export the Chinese-made parts to a low-tariff-tax country like Australia to assemble before importing them to the US, than it is to just assemble them in the US.
Also, how is it not inflationary to make the cheapest product in the market $110 rather than $100?!
It gets even worse for exports.
Let's imagine the EU reciprocates Trump's 20% tariff tax on imports from the US.
That $125.50 US product gets slugged with an additional $25.10 tariff tax in the EU. That's $150.60.
The net result is American goods end up far *less* competitive.
By the way @grogsgamut.bsky.social and @johnquiggin.bsky.social: I'm not a trained economist, so please let me know if there's something critical I've missed?
@ajsadauskas.bsky.social Or @johnquiggin on Mastodon...
@ajsadauskas.bsky.social They have thought of that, though whether it will work as imagined is another matter.
Other countries' tariffs will themselves be adjusted based on a range of criteria, including "Does the nation help China evade tariffs via re-export?"
This is from the plan laid out by the investment banker now chairing Trump's Council of Economic Advisers:
https://katyswain.me/blog/2025-03/destroying-your-country-part-2-poverty-wealth.
(Trump's appointments are based on ability to say "It is a cunning plan, my lord.")
@ajsadauskas good opportunity for an Australian re-exporting industry ;-)
@ajsadauskas
Viewing Trump's tariffs as some strategy to make america grate again will just get you confused. That is not what it is about.
Many countries have some form of sales tax, but in the USA that is done by each state, not federally. Introducing a federal one would be politically suicidal and never get through congress.
However, by some quirk of USA law the president is allowed to apply tariffs all by himself.
So, view the tariffs as Trump's sales tax and it all starts to make sense. For example it explains why he first targeted their largest trading partners - it maximises the income.
It is just a means of shifting taxation from the rich to the poor.
@ocratato Really great point around the sales tax.
And presumably local and state sales taxes would be levied on the price of goods after tariff taxes are applied?
If so, given most products are either imported or use imported parts/materials, Trump has basically unilaterally increased every state and local sales tax in America.
So using my example above of an American-made product with Chinese parts.
With tariff taxes, it goes up in price from $100 to $125.50.
Let's imagine a given city or state has a 10% sales tax.
Before the Trump tariff tax, that item would have cost $100 and attracted $10 in sales tax.
With the Trump tariff tax, that same item costs $125.50 and attracts $12.55 in sales tax.
In effect, he's pushed up the local sales tax by $2.55.
So the total cost, including sales taxes and tariffs, goes up from $110 to $138.05!
And keep in mind this is for an American-made product!
Didn't the Republicans say they were the party of lower taxes? Sure doesn't seem that way to me!
@ajsadauskas
The history of USA taxation is interesting, and I am sure its well known to Trump.
Back in 1912 federal income was based on tariffs, but was becoming insufficient, so they switched to income tax.
At the time most people would have rarely bought anything imported, only the wealthy had the need and means to do so. Hence the switch to income tax had the effect of moving the tax burden from the rich to the poor.
Fast forward 100 years or so. Now most things that the average person buys has a significant imported content. On the other hand as the income disparity between the rich and poor increases it means more of the tax burden has to be on the wealthy.
Switching back to tariffs again moves the tax burden from the rich to the poor.
The main problem with this plan is that tariffs will not raise enough. The plan thus requires severe cuts to social services.