Economy
Walmart, The Sanctuary of the Church of MAGA, Says Trump Tariffs Could Lead to Higher Prices
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Ask the average Trump voter how tariffs work, and you will likely get one of two things: A blank stare and possibly a shrug, or some incorrect explanation that paints tariffs as a terrific idea.
And as a political tool, a piece of rhetoric for Donald Trump to use as part of the New Republican Platform (which is actually just a pre-Reagan platform), tariffs can be very effective. But for economics — as they work today, not in the historical sense of building the Republican Party on the ideals of protectionism — tariffs are terrible.
That’s not even really a controversial opinion. That’s the viewpoint of every modern economist.
The whole idea of tariffs is to protect domestic industries. In its simplest explanation, a tariff is a tax placed on imported goods. That drives up the price of the import. If imported — cheaper — goods cost the same as an identical item made domestically, the theory is that consumers will be incentivized to buy the American-made item rather than the foreign one.
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If a doo-dad made in Kansas costs ten dollars and the same doo-dad made in Indonesia costs two, a tariff might be imposed on the Indonesian one that effectively makes them both cost ten dollars.
What this doesn’t take into account is that most people will simply go without the doo-dad to begin with if there is no cheaper version.
Tariffs also don’t take into account the availability of the things needed to make a product in the first place. Take the second-most popular beverage in America (after bottled water): Coffee. Coffee is grown all throughout the “Bean Belt,” a region along the equator that runs between the Tropics of Cancer and Capricorn. You know what country is outside the Bean Belt?
Sure, we grow coffee in Hawaii and recently started limited growing in Southern California. But a pound of Colombian coffee might cost ten dollars, and a pound of Kona costs sixty. If there’s a fifty-dollar tariff on Colombian coffee, the price of a can of Folgers skyrockets.
But there’s something even more serious than the possibility of paying the price of a latte for a brewed cup of coffee at home. That is the fact that America is a technology-driven country. Our primary diversions are all technology-based.
More precisely stated, there are no TVs “Made in the USA” at all. Some of them may be assembled here, but the components — all subject to tariffs — would come from overseas. Fully-assembled TVs are all imported.
Enter Walmart, the world’s largest retailer by far.
“We never want to raise prices,” says John David Rainey, Walmart’s CFO, “but there will be cases where prices will go up for consumers.” And Rainey is correct. The fact is, Walmart became the world’s largest retailer, with their promise of “Everyday Low Prices,” specifically by importing most of its goods, and specifically from China.
Trump’s plan is to institute a 10% to 20% tax on all imported goods, and a 60% to 100% on goods from China.
If you walked into a Walmart and used the fingers of your left hand to count items made specifically in China and your right fingers to count literally any other country, your left hand would cramp and you’d still be making a fist with your right, 25 feet in the door.
If you’re still in favor of tariffs at this point in the article, it’s likely that you’ve bought into what Trump’s been claiming. Namely, that tariffs are paid for by the foreign country attempting to get their goods into the United States.
But tariffs are paid for by the importer — the American company that needs the product. China and Brazil and Malaysia are not going to feed the US Treasury (where tariffs end up) in order to sell their products. They’re going to sell them to the American companies that want to buy them at the same prices, and let those companies figure out how to make up the difference.
It’s always made up by raising prices.
And Walmart isn’t the only company that will be affected by a long shot. A recent CNBC report on tariffs had quotes from AutoZone, Home Depot, and Lowe’s, as well as others. A sample? The AutoZone CEO, Philip Daniele, told his investors “If we get tariffs, we will pass those tariff costs back to the consumers.”
Provided the average American doesn’t change their entire lifestyle to accommodate the idea of living without items that are only affordable because they’re imported, they could see an increase in expenses of nearly $8,000 a year per family. That’s just the average, though. The biggest burden would be on low-income households who rely on, you guessed it, Walmart.
Somehow, I don’t think “Same Prices as Everyone Else Everyday” has quite the same ring to it.
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