Why a 45 Percent Tariff is Foolish



In the last Republican debate, one question addressed to Donald Trump concerned an interview Trump had done with the New York Times in which he said he would impose a 45 percent tariff on China. Trump denied proposing it; the New York Times released the interview audio, which does include the 45 percent tariff comment. Whether or not the Donald Trump of today favors a 45 percent tariff, the idea itself is foolish.

The goal of this tariff would be to tax goods coming from China to make U.S. manufacturing more competitive in comparison. In theory, this would lead to the return of American manufacturing jobs. This type of policy comes from the belief that all the losses of manufacturing have come from competition with China, which ignores the major factor of productivity.

Is it more likely that technology has advanced over the past few decades, leading to a loss of manufacturing jobs, or that technology and productivity have not advanced, and jobs have left simply to find lower wages? Realistically, the former is more likely, meaning that even if the tariff were to cause Chinese manufactured goods to become more expensive than American goods, not all the jobs would return to America. That might sound like even if we could create some jobs, it would be worth it; that overlooks the fact that regardless of whether you buy an American product or a Chinese product, it will now be drastically more expensive.

Anything that has a “Made in China” sticker on it will cost 45 percent more, and the products whose its manufacture moves from China to the United States, the price would still increase because, if it were cheaper to make in the United States, it already would be. This price increase thus would be on most consumer products and would affect everyone.

While people are afraid of deficits, the trade deficit between any two countries is not the real loss the word implies. This is because the production of any good usually involves several countries, at a minimum. Take an iPhone for example: The end product designed in California and is assembled in China, which many people know, but some components, like its processor and audio chips, are actually made in the United States.

Then there are the raw materials that go into the components: rare-earth metals that could come from several different countries. Additionally, there are other components that are made in Europe, like the gyroscope. The touch screen most likely comes from Japan. Overall, an iPhone’s components originate from all over, but people see it as only a Chinese product. Because the iPhone is assembled by a Chinese company, the tariff would apply, making the next iPhone more expensive.