The Government’s Tariff Bill
U.S. tariffs supposedly generated a record $31 billion in revenue during the month of August. According to a breathless report from Fox News, “The US could collect as much tariff revenue in just four months to five months as it did over the entire previous year.” But while those numbers may prove accurate, they represent only one side of the federal government’s ledger. There’s hasn’t been much attention to the fact that with the tariffs Washington is effectively taxing itself.
President Trump has set a tariff rate of 50% on steel, copper, and aluminum imports from most countries, excluding Great Britain. He has also imposed a 50% rate on the steel or aluminum content in 407 different products, from truck trailers to barbecue forks with wood handles. Those tariffs don’t just affect imports. By making foreign products more expensive, they make it easier for domestic producers to jack up prices; were that not the case, the tariffs would serve no purpose.
And who buys that domestic metal? Much of it ends up in goods purchased by Uncle Sam (fighter planes, postal delivery trucks) or by state and local governments using federal as well as state money (girders for highway bridges, pipes for water systems). With the tariffs in effect, governments buy less with each dollar they spend on such things.
Steep tariffs on pharmaceuticals are supposedly impending. The United States and the European Union have agreed that European drugs will face a 15% U.S. tariff, and Trump has threatened tariffs of up to 250% on drugs from other countries. Since the Washington pays 59% of the cost of outpatient prescription drugs and the states pay another 5% to 10%, governments will bear most of the burden of higher prices.
These tariffs are not affected by the recent court decision blocking many of the tariffs Trump has proposed. They could remain in place indefinitely. And as long as they do, U.S. taxpayers will pay far more than they should for the goods their tax dollars buy.
Tags: Manufacturing, steel